The Indian government may be planning to issue a mandate for companies to buy ‘Made-in-India’ semiconductor chips once local production fully takes off.
"The policy will favour Made-in-India chips to support fabrication in India. We see no reason to allow semiconductor imports once India begins production. We will strive to meet local demand from domestic production," a government official told CNBC-TV18 on the condition of anonymity, on the eve of SEMICON India 2022, a three-day global semiconductor conference organised by the Ministry of Electronics and Information Technology (MEITY), in Bengaluru.
India has been affected by the severe shortage of semiconductor chips, which has rocked production across the globe. Semiconductor chips are a crucial component in electronics devices -- from smartphones and cars to televisions and gaming consoles, practically every device that uses electronics needs a semiconductor chip to function.
To overcome this problem and become self-sufficient, India, as part of its Aatmanirbhar Bharat (self-reliant India) programme, in December announced an Rs 76,000-crore incentive scheme to encourage the manufacture of semiconductor chips in India. Under the scheme, 50 percent of the design expenditure is to be borne by the government. Additionally, the government will provide a 6 percent incentive on incremental sales; which will taper over five years to 4 percent.
The government has also been aggressively wooing investors, especially the Indian diaspora, assuring them that they need not be concerned about execution risks and tariffs as the government will handhold them.
So far, the government has received proposals from five companies for setting up the electronic chip and display manufacturing plants with an investment of Rs 1.53 lakh crore. A Vedanta-Foxconn joint venture, IGSS Ventures and ISMC have proposed to set up electronic chip manufacturing plants with a $13.6-billion investment and have sought support of $5.6 billion from the Centre.
Intel Foundry Services too is reportedly interested in the scheme and is currently understood to be in the process of checking the details, identifying design and manufacturing-linked incentives and evaluating setting up a fabrication unit in India.
To oversee the Semiconductor India Programme, the government has established the Indian Semiconductor Mission (ISM). The government has been looking to appoint a chief executive officer for ISM for the past month. "We are close to finalising the CEO of ISM. A final decision is likely by May," the official said.
All proposals submitted under the Semiconductor India Programme must first be approved by the ISM, after which MEITY will clear them and place them before the Union Cabinet.
In 2020, before the shortage hit, the demand for semiconductor chips in India stood at Rs 1.1 lakh crore, which was met entirely through imports. While there is no data available on likely production, Minister of State for Electronics and Information Technology Rajeev Chandrasekhar has said that India is poised to consume semiconductor chips worth $80 billion (Rs 6.12 lakh crore) by 2026.
