In new chip push, centre ready with $15 bn blueprint

Highlights:

• After committing nearly all of the $10 billion allocated in the first phase of its semiconductor manufacturing incentive policy, the Indian government is now strategizing for a second phase.
• This new phase could see an increase in the outlay to $15 billion, with a stronger focus on attracting chip fabrication plants, capital support for raw materials, and a reduction in subsidies for assembly and testing facilities.

Key Developments:

1. Increased Funding:

• The government plans to raise the incentive program's budget from $10 billion to $15 billion. This expansion aims to maintain India's competitiveness in attracting semiconductor manufacturing investments, particularly as other countries are also vying for these high-value industries.

2. Shift in Focus:

• The new scheme will prioritize the establishment of semiconductor fabrication plants, which are critical for moving up the value chain in the global chip manufacturing ecosystem.
• The focus is to transition from assembly and testing to more complex fabrication processes, aligning India with established chip hubs like the US, Taiwan, and South Korea.

3. Reduced Subsidies for Assembly and Testing:

• In the first phase, the government had increased capex subsidies for assembly and testing plants from 30% to 50% to attract investments, such as the $2.7 billion plant by Micron Technology.
• However, the second phase will see a reduction in these subsidies back to 30% for conventional packaging and 40% for advanced packaging technologies. This shift reflects a strategic decision to reallocate resources towards more critical areas like fabrication.

4. Support for Ecosystem and Raw Materials:

• The government plans to offer capital support for essential raw materials, gases, and chemicals needed in semiconductor manufacturing.
• This could include incentivizing the fabrication of advanced display technologies, such as micro-LEDs, further enhancing India's technological capabilities in the semiconductor sector.

5. Challenges and Delays:

• Despite the aggressive push, some projects face delays. For instance, Micron Technology's ATMP plant in Gujarat is reportedly 133 days behind schedule due to labor shortages.
• Additionally, Tata Electronics has requested an exemption from the requirement to demonstrate the capability to manufacture 28nm chips for continued fiscal support, which the government is still deliberating.

Implications for India:

• Strategic Importance: This initiative underscores India's ambition to become a significant player in the global semiconductor market. By focusing on fabrication plants and advanced technologies, India is positioning itself as a vital node in the global semiconductor supply chain, which is crucial for economic and technological sovereignty.
• Global Competitiveness: The increased funding and shift in focus are necessary for India to compete with other countries that are also heavily investing in their semiconductor industries.
• Long-Term Vision: The government's strategy highlights a long-term vision of developing a comprehensive semiconductor ecosystem in India, which includes not just assembly and testing but also fabrication and raw material production.

Prelims Takeaways:

• India-Taiwan Relations