The goals set are achievable, but they are based on a variety of factors, the most important of which is the business climate.
The Narendra Modi government’s focus on semiconductor production, as evidenced by an industry package, can help India become a global hub for electronics. Success, however, will depend on various factors.
The Cabinet this week approved a Rs 76,000 crore program for the development of a sustainable semiconductor and display ecosystem in the country. The program, according to a government press release, “will usher in a new era in electronics manufacturing by providing a globally competitive set of incentives to semiconductor and display manufacturing companies as well as design. This will pave the way for India’s technological leadership in these areas of strategic importance and economic self-reliance.
The intention is indeed good, as not only India, but the whole world is facing a semiconductor shortage. After the start of the Covid pandemic, all countries became aware of the dependence of supply chains on China. The government believes that the new initiative “will pave the way for India’s technological leadership in these areas of strategic importance and economic self-reliance.”
The program offers attractive incentive support to companies and consortia engaged in manufacturing. These include silicon semiconductor factories, display factories, compound semiconductor / silicon photonics / sensors factories (including MEMS), semiconductor packaging and semiconductor design. -conductors. “Fab” means a manufacturing plant.
A program to establish semiconductor and display factories in India will extend tax support up to 50% of the cost of the project. The central government will work closely with state governments to establish high-tech clusters with the required infrastructure in terms of land, semiconductor grade water, high grade energy, logistics and ecosystem. to approve applications for at least two completely new semiconductor factories and two displays. fabs in the country, according to the press release.
There is another plan for setting up compound semiconductor / silicon photonics / sensor factories and ATMP / OSAT semiconductor facilities in India. In this context, tax assistance of 30% of investment expenditure will be extended to approved units. At least 15 of these compound semiconductor and semiconductor packaging units are expected to be created with government support under this program.
The Design Incentive Program (DLI) will extend the Product Design Incentive up to 50% of qualifying spend and the Product Deployment Incentive from 6% to 4% on net sales during five years. Support will be provided to 100 national semiconductor design companies for integrated circuits (ICs), chipsets, systems on chip (SoC), IP systems and cores, and semiconductor related design. This, according to the press release, will facilitate the growth of at least 20 of these companies which can achieve sales of over Rs 1,500 crore over the next five years.
The government has also decided to create an Indian semiconductor mission. It will be led by global experts from the semiconductor and display industry. It will act as the nodal agency for efficient and smooth implementation of the semiconductor and display ecosystem programs.
On the Rs 76,000 crore package, the incentive support is Rs 55,392 crore.
“In the current geopolitical scenario, reliable sources of semiconductors and displays are of strategic importance and are essential for the security of critical information infrastructures,” the press release said. “The approved program will propel innovation and strengthen national capacities to secure India’s digital sovereignty. It will also create highly skilled employment opportunities to harness the country’s demographic dividend. “
The program will promote greater national added value in the manufacturing of electronic products and contribute significantly to the achievement of a digital economy of $ 1 trillion and a GDP of $ 5,000 billion by 2025, adds the press release.
These goals are achievable, but they are based on a variety of factors, the most important of which is the business climate. Due to the state mentality, various government bodies, both in the Center and in the states, make the life of businessmen miserable.
Apart from the mess of the GST, caused mainly by variable rates, there are regulations and compliances that keep growing. Another element that annoys business people is unpredictability. It is evident not only in the decisions of the central government, but also by the states. For example, after becoming Chief Minister of Andhra Pradesh, YS Jagan Mohan Reddy canceled all Wind and Solar Power Purchase (PPA) agreements.
Such decisions undermine India’s efforts to attract investment and become a $ 5,000 billion economy.
Then there is the fear of the agencies, the Directorate of Enforcement and the Income Tax Service. An industrialist may get a few visits just because his son or daughter posted something mean about a politician or a government.
Unsurprisingly, the rich Indians are leaving the country. According to an AfrAsia Bank study, 7,000 wealthy people (HNWI) left India in 2019. India ranked second in the list of HNWIs leaving their country of origin; China tops the list.
Government programs and incentives will help the country become a global electronic hub, but much more is also needed.