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Under Make in India for electronics, semiconductor fabs to be first category

Financial and tax incentives would be provided to a registered entities who agree to set up semiconductor water fabrication units in India.

July 23, 2020 / 06:01 PM IST

As part of the Atmanirbhar Bharat or self-reliant India mission, it is likely that semiconductor wafer fabrication (fab) manufacturing on a large scale for use as white goods’ components could be the first category.

Sources told Moneycontrol that states like Gujarat would be identified as the manufacturing location for setting up factories.

“Indian companies will be incentivised to set up semiconductor fab units to manufacture internal components and chipsets for hand-held devices and small appliances. There would be tax advantages as well as some sops provided for real estate, land. Soft loans could also be given,” said an official.

Semiconductor fab is a unit where chipsets or tiny circuits are produced for use in electronic devices. Here the component called wafer is the base of the chip-set that is produced.

The Ministry of Electronics and Information Technology is working with the appliance and electronic goods makers to look at segment-wise information about which component is made where and what will be the requirement to set up production facilities in India.

Industry estimates suggest that the Indian semiconductor market in India stands at around USD 300 million in India. If semiconductor fabs are added to this, the value could go upto USD 4-5 billion.

India imports all semiconductor fab units from China right now. About 1-2 percent of the products are also imported from Taiwan, another upcoming location for this industry.

A policy framework is being worked out wherein the government could partly fund setting up of semiconductor fab facilities. Collateral-free loans could also be provided to interested parties to fund between 15-20 percent of the total cost of setting up.

Semiconductor fab units would not just help in manufacturing the critical chip-sets or internal processors for smartphones, but will also come handy in producing memory units for small appliances like laptops, tablets, microwave, power banks, LED smart lighting, cameras, electric kettle among others.

So far, China has been the largest market for semiconductor components used in electronic goods. India produces semiconductor equipment only for large commercial use in computers.

It is estimated that setting up a semiconductor fab plant from scratch with multi-level production facilities would cost almost USD 1 billion (Rs 7,500 crore).

Apart from uninterrupted power supply that is the biggest requirement for setting up semiconductor fab units in India, each chip-making unit requires almost 4.8 million gallons of pure water for production.

MEITY has already worked out a Scheme for Promotion of manufacturing of Electronic Components and Semiconductors (SPECS). Here, it is proposed to offer financial incentive of 25 percent of capital expenditure for the manufacturing of goods that constitute the supply chain of an electronic product.

Under this scheme, production of items like chips, diodes, optical fiber preform, circuits and semiconductor wafers will be incentivised among others.

M Saraswathy
M Saraswathy
first published: Jul 23, 2020 05:58 pm