Lok Sabha Question No. 2193 (UNSTARRED), answered on 2020-03-04
Subject: Electronic Chip Manufacturing Units
Ministry: ELECTRONICS AND INFORMATION TECHNOLOGY
Asked by: D. M. Kathir Anand

## GOVERNMENT OF INDIA MINISTRY OF ELECTRONICS AND INFORMATION TECHNOLOGY

## LOK SABHA UNSTARRED QUESTION NO. 2193

TO BE ANSWERED ON: 04.03.2020

## ELECTRONIC CHIP MANUFACTURING UNITS

## 2193.   SHRI D.M. KATHIR ANAND:

Will the Minister of Electronics & Information Technology be pleased to state:

- (a) whether  the  Government  is  aware  that  despite  its  campaign  of  Digital  India,  the country lacks basic necessities like a semi-conductor chip manufacturing plant and if so,  the  details  thereof  and  the  reasons  therefor  along  with  the  reaction  of  the Government thereto;
- (b) whether any electronic chip manufacturing units are likely to be operational in the next five years;
- (c) if so, the details and the present status thereof;
- (d) whether the setting up of electronic chip facilities would be of the nation's strategic purpose as chips had security implications and if so, the details thereof; and
- (e) whether the Government is considering to provide subsidy to these units and if so, the details thereof?

## ANSWER

## MINISTER OF STATE FOR ELECTRONICS AND INFORMATION TECHNOLOGY (SHRI SANJAY DHOTRE)

(a), (b) and (c): The Government attaches high priority to electronics hardware manufacturing and it is one of the important pillars of both 'Make in India' and 'Digital India' programmes. As a result of various measures taken by the Government over the last few years and efforts of the industry, electronics hardware production in the country has grown from Rs.1,90,366 crore  in  2014-15  to  Rs.4,58,006  crore  in  2018-19,  at  a  Compound  Annual  Growth  Rate (CAGR) of 25%.

Semi-Conductor Laboratory (SCL), Mohali, an autonomous body under the Department of Space, and Gallium Arsenide Enabling Technology Centre (GAETEC), Hyderabad, a unit of Society for Integrated Circuit Technology and Applied Research (SITAR) have facilities for Design, Development, Fabrication, Assembly, Packaging, Testing and Quality Assurance of CMOS based semiconductor chips and GaAs monolithic microwave integrated circuits, RF sub systems, respectively, for various applications, and are meeting the strategic requirements.

However,  there  is  no  commercial  semiconductor  chip  manufacturing  plant  in  the  country. Government has been making serious efforts to set up semiconductor fabrication facilities in the  country.  The  Cabinet,  in  its  decision  dated  20.04.2011  had  set  up  an  Empowered Committee (EC) with the mandate to identify technology and potential investors for setting up Semiconductor Wafer Fabrication (FAB) manufacturing facilities in the country, and to recommend nature and quantum of Government support. Based on the recommendations of the  EC,  Government  had  approved  two  proposals  for  setting  up  of  Semiconductor  FAB facility,  based  on  which  Letter  of  Intent  (LoI)  dated  19.03.2014  were  issued  to  the  two consortia.  As per the LoI, both the consortia were required to submit certain documents for demonstration  of  commitment.  The  consortium  led  by  M/s.  Jaiprakash  Associates  Ltd. withdrew their proposal and the consortium led by M/s. HSMC Technologies India Pvt. Ltd. could  not  submit  the  requisite  documents  for  demonstration  of  commitment,  despite  being provided  extension  of  time  on  several  occasions.  Hence,  the  LoI  issued  to  M/s.    HSMC Technologies India Pvt. Ltd. was cancelled on 20.04.2018. The efforts to set up commercial semiconductor chip manufacturing plant in the country did not meet with success, although very attractive set of incentives were offered to the aforesaid consortia.

India is a signatory to the Information Technology Agreement (ITA-1) of WTO under which most of the electronic components, including semiconductor integrated circuits (chips), are being imported at Nil Basic Custom Duty (BCD). Besides, Electronics hardware manufacturing  sector  in  the  country  faces  lack  of  level  playing  field  vis-à-vis  competing nations  on  account  of  several  disabilities  such  as  lack  of  adequate  infrastructure,  domestic supply chain and logistics; high cost of finance; inadequate availability of quality power and water and limited focus on R&D by the industry, which render domestic electronics hardware manufacturing  uncompetitive.  Further,  the  manufacturing  facilities  for  semiconductors  are highly  capital  intensive  and  have  to  deal  with  constantly  changing  technology. It is understood that assured business out of the market demand is the key to establish and operate a sustainable Semiconductor FAB.

(d):      Electronics  impacts  a  large  number  of  economic  sectors  including  IT,  telecom, broadcasting,  power,  etc.  as  well  as  strategic  sectors,  viz.,  Defence,  Space  and  Atomic Energy. The growth of electronics industry has  enormous implication for all these sectors. Besides  the  economic  imperative,  focus  on  electronics  hardware  manufacturing  up  to  the integrated circuit  or  chip  level  is  required  due  to  the  growing  security  concerns  as  well  as strategic  importance.  Presently,  SCL  and  GAETEC  facilities  are  being  used  for  strategic purposes.

(e):       In order to attract investment for setting up of Semiconductor FAB facilities in the country,  capital  subsidy  of  20  -  25%  was  available  under  the  Modified  Special  Incentive Package Scheme  (M-SIPS). However, no proposal was received for setting up of Semiconductor  FAB  under  M-SIPS.  Following  incentives  are  available  to  companies  for setting up of Semiconductor FAB facilities in India:

- (i) Capital  goods  for  setting  up  of  Semiconductor  FAB  are  exempted  from  Basic Customs Duty (BCD).
- (ii) Investment linked deduction under Section 35AD of the Income-tax Act.
- (iii) Deduction of expenditure on research and development as admissible under Section 35(2AB) of the Income-tax Act.
- (iv) New  domestic  companies  making  fresh  investment  in  manufacturing  and  starting operations  before  March  31,  2023  have  an  option  to  pay  corporate  income  tax  at reduced  rate  of  15%.  Such  companies  will  also  not  be  liable  to  pay  Minimum Alternate Tax (MAT).

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