Lok Sabha Question No. 604 (UNSTARRED), answered on 2022-07-20
Subject: Holistic Ecosystem for Semiconductors
Ministry: ELECTRONICS AND INFORMATION TECHNOLOGY
Asked by: Gyaneshwar Patil

## GOVERNMENT OF INDIA MINISTRY OF ELECTRONICS AND INFORMATION TECHNOLOGY

## LOK SABHA

## UNSTARRED QUESTION NO. 604

TO BE ANSWERED ON: 20.07.2022

## HOLISTIC  ECOYSYSTEM FOR SEMICONDUCTORS

## 604.  SHRI GYANESHWAR PATIL:

Will the Minister of ELECTRONICS AND INFORMATION TECHNOLOGY be pleased to state:

- (a)  whether the Government proposes to develop a holistic ecosystem for the semiconductor manufacturing industry and if so, the details thereof;
- (b)  whether the Government proposes to provide incentives and special assistance for setting up local factories and if so, the details thereof;
- (c)  the details of the response received by the Government from the young innovators in this regard;
- (d)    whether  the  Government  has  approved  any  scheme  to  promote  semiconductor  and display manufacturing in the country; and
- (e)    the  details  of  other  steps  taken  by  the  Government  to  make  the  country  self-reliant  in electronics manufacturing?

## ANSWER

## MINISTER OF STATE FOR ELECTRONICS AND INFORMATION TECHNOLOGY (SHRI RAJEEV CHANDRASEKHAR)

- (a): Yes, Sir. Government is very focused on its important objective of building the overall semiconductor  ecosystem  and  ensure  that,  it  in-turn  catalyses  India's  rapidly  expanding electronics manufacturing and innovation ecosystem. Government has approved the Semicon India  programme  with  a  total outlay of INR  76,000  crore  for  the  development  of semiconductor and display manufacturing ecosystem in the country. The programme aims to provide financial support to companies investing in semiconductors, display manufacturing and design ecosystem.
- (b) and (d): Following four schemes have been introduced under the aforesaid programme:
- i. Scheme for setting up of Semiconductor Fabs in India provides fiscal support to eligible applicants for setting up of Semiconductor Fabs which is aimed at attracting large  investments  for  setting  up  semiconductor  wafer  fabrication  facilities  in  the country. Following fiscal support has been approved under the scheme:
-  28nm or Lower - Up to 50% of the Project Cost
-  Above 28 nm to 45nm - Up to 40% of the Project Cost
-  Above 45 nm to 65nm - Up to 30% of the Project Cost
- ii. Scheme for setting up of Display Fabs in India provides fiscal support to eligible applicants for setting up  of Display  Fabs  which  is  aimed  at  attracting  large investments for setting up TFT LCD / AMOLED based display fabrication facilities in  the  country.  The  Scheme  provides  fiscal  support  of  up  to  50%  of  Project  Cost subject to a ceiling of INR 12,000 crore per Fab.
- iii. Scheme for setting up of Compound Semiconductors / Silicon Photonics / Sensors Fab and Semiconductor Assembly, Testing, Marking and Packaging (ATMP) / OSAT facilities in India: The Scheme provides a fiscal support of 30% of the Capital Expenditure to the eligible applicants for setting up of Compound Semiconductors / Silicon Photonics (SiPh) / Sensors (including MEMS) Fab and Semiconductor ATMP / OSAT facilities in India.
- iv. Design Linked Incentive (DLI) Scheme offers financial incentives, design infrastructure  support  across  various  stages  of  development  and  deployment  of semiconductor  design  for  Integrated  Circuits  (ICs),  Chipsets,  System  on  Chips (SoCs), Systems & IP Cores and semiconductor linked design. The scheme provides 'Product Design Linked Incentive' of up to 50% of the eligible expenditure subject to a ceiling of Rs. 15 Crore per application and 'Deployment Linked Incentive' of 6% to 4%  of  net  sales  turnover  over  5  years  subject  to  a  ceiling  of  Rs.  30  Crore  per application.

In  addition  to  the  above  schemes,  Government  has  also  approved  modernisation  of  SemiConductor Laboratory, Mohali as a brownfield Fab.

- (c): Under Semicon India Program, Government hasalso approved Design Linked Incentive (DLI) Scheme  for domestic companies, start-ups and MSMEs  to  develop&  design semiconductor chips in the country.DLI Scheme aims to offer the fiscal support as well as design  infrastructure  support  across  various  stages  of  development  and  deployment  of semiconductor  design  for  Integrated  Circuits  (ICs),  Chipsets,  System  on  Chips  (SoCs), Systems & IP Cores and semiconductor linked design over a period of 5 years. Sixteen (16) applications have been received under Design Linked Incentive Scheme.
- (e):  Other  steps  taken  by  the  government  to  make  the  country  self-reliant  in  electronics manufacturing are as follows:
1. National Policy on Electronics 2019 :  The National Policy on Electronics 2019 (NPE 2019) has been notified on 25.02.2019. The vision of NPE 2019 is to position India as a global hub for Electronics System Design and Manufacturing (ESDM) by encouraging and  driving  capabilities  in  the  country  for  developing  core  components,  including chipsets, and creating an enabling environment for the industry to compete globally.

To attract and incentivize large investments in the electronics value chain and promote exports, following three Schemes have been notified under the aegis of NPE 2019:

- (i) Production  Linked  Incentive  Scheme  (PLI)for  Large  Scale  Electronics Manufacturing notified  vide  Gazette  Notification  No.CG-DL-E-01042020218990  dated  April  01,  2020  provides  an  incentive  of  4%  to  6%  to  eligible companies  on  incremental  sales  (over  base  year)  involved  in  mobile  phone manufacturing and manufacturing of specified electronic components, including Assembly, Testing, Marking and Packaging (ATMP) units. Second Round of the PLI Scheme for Large Scale Electronics Manufacturing was launched on 11.03.2021 for incentivizing Electronic Components.  Under the  Second  Round,  incentives  of  5%  to  3%  shall  be  extended  on  incremental sales of goods manufactured in India and covered under the target segment, to eligible companies, for a period of four (4) years.
- (ii) Scheme  for  Promotion  of  Manufacturing  of  Electronic  Components  and Semiconductors  (SPECS) notified  vide  Gazette  Notification  No.CG-DL-E01042020-218992 dated April 01, 2020 provides financial incentive of 25% on capital  expenditure  for  the  identified  list  of  electronic  goods  that  comprise downstream  value  chain  of  electronic  products,  i.e.,  electronic  components, semiconductor/ display fabrication units, ATMP  units, specialized subassemblies and capital goods for manufacture of aforesaid goods.
- (iii) Modified  Electronics  Manufacturing  Clusters  (EMC  2.0)  Scheme notified vide Gazette Notification No.CG-DL-E-01042020-218991 dated April 01, 2020 provides support for creation of world class infrastructure along with common facilities and amenities, including Ready Built Factory (RBF) sheds / Plug and Play facilities for attracting major global electronics manufacturers along with their supply chain to set up units in the country. The Scheme provides financial assistance  for  setting  up  of  both  EMC  projects  and  Common  Facility  Centres (CFCs) across the country.
- (iv) Production Linked Incentive Scheme (PLI) for IT Hardware notified vide Gazette  Notification  No.  CG-DL-E-03032021-225613  dated  March  03,  2021 provides of 4% to 2% / 1% on net incremental sales (over base year) of goods manufactured  in  India  and  covered  under  the  target  segment,  to  eligible companies,  for  a  period  of  four  (4)  years.The  Target  Segment  under  PLI Scheme includes (i) Laptops (ii) Tablets (iii) All-in-One PCs and (iv) Servers.
2. 100%  FDI :As  per  extant  Foreign  Direct  Investment  (FDI)  policy,  FDI  up-to  100% under  the  automatic  route  is  permitted  for  electronics  manufacturing  (except  from countries  sharing  land  border  with  India),  subject  to  applicable  laws/  regulations; security and other conditions.

## 3. Modified Special Incentive Package Scheme (M-SIPS) :

To offset disability and attract investment in Electronic System Design and Manufacturing  (ESDM)  sector,  M-SIPS  was  approved  in  July  2012.  Revisions  were made in the scheme in 2015 by expanding its scope and adding new product categories accompanied by simplification of procedures.  The  scheme provides 20-25% of capex subsidy on investment made in the first 5 years of the project (20% for investments in Special Economic Zones (SEZs) and 25% in non-SEZs). The incentives are available for  44  categories  /  verticals  of  electronic  products  and  components  covering  entire electronics manufacturing value chain. The scheme was open to receive applications till 31.12.2018. Most of the projects approved under the scheme are in the implementation mode. So far, 314 applicants with an investment of INR 86,912 crore and committed incentives  of  INR  9,544  crore  have  been  approved.  Incentives  amounting  to  INR 1781.02 crore have been disbursed. Out of 314 units approved, 271 units have invested INR 31,416 crore and 233 units have started production.

4. Electronics  Manufacturing  Clusters  (EMC)  Scheme :  Electronics  Manufacturing Clusters Scheme was notified on 22 nd October, 2012 to provide support for creation of world-class  infrastructure  along  with  common  facilities  and  amenities  for  attracting investment. Under the Scheme, 19 Greenfield EMCs and 3 Common Facility Centres (CFCs)  measuring  an  area  of  3,464  acres  with  total  project  cost  of  INR  3,743  crore including Government Grant-in-Aid of INR 1,527 crore have been approved.
5. Electronics  Development  Fund  (EDF) :  Electronics  Development  Fund  (EDF)  has been set up as a 'Fund of Funds' to participate in professionally managed 'Daughter Funds' which in turn will provide risk capital to startups and companies developing new technologies in the area of electronics and Information Technology (IT). This fund is expected to foster R&D and innovation in these technology sectors. INR 409 crore has been committed through EDF to 9 Daughter Funds with a targeted corpus of INR 2,626 crore.  Till  date,  EDF  has  invested  INR  236.48  crore  in  8  Daughter  funds  with  direct employment generation of 18,500.
6. Phased  Manufacturing  Programme  (PMP) has  been  notified  to  promote  domestic value addition in mobile phones and their sub-assemblies / parts manufacturing. As a result,  India  has  rapidly  started  attracting  investments  into  this  sector  and  significant manufacturing capacities have been set up in the country. The manufacturing of mobile phones  has  been  steadily  moving  from  Semi  Knocked  Down  (SKD)  to  Completely Knocked  Down  (CKD)  level,  thereby  progressively  increasing  the  domestic  value addition.
7. Tariff Structure has been rationalized to promote domestic manufacturing of electronic goods, including, inter-alia, Cellular mobile phones, Televisions, Electronic components, Set Top Boxes for TV, LED products and Medical electronics equipment.
8. Exemption from Basic Customs Duty on capital goods :  Notified  capital  goods  for manufacture  of  specified  electronic  goods  are  permitted  for  import  at  'NIL'  Basic Customs Duty.
9. Simplified  import  of  used  plant  and  machinery :  The  import  of  used  plant  and machinery  having  a  residual  life  of  at  least  5  years  for  use  by  the  electronics manufacturing industry has been simplified through the amendment of Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016, vide Ministry of Environment, Forest and Climate Change Notification dated 11.06.2018.
10. Relaxing  the  ageing  restriction :  The  Department  of  Revenue  vide  Notification No.60/2018-Customs  dated  11.09.2018  has  amended  the  Notification  No.158/95Customs dated 14.11.1995, relaxing the ageing restriction from 3 years to 7 years for specified electronic goods manufactured in India and re-imported into India for repairs or reconditioning.
11. Public  Procurement  (Preference  to  Make  in  India)  Order  2017 :  To  encourage 'Make in India' and to promote manufacturing and production of goods and services in India  with  a  view  to  enhancing  income  and  employment,  the  Government  has  issued Public Procurement (Preference to Make in India) Order 2017 vide the Department for Promotion  of  Industry  and Internal  Trade  (DPIIT)  Order  dated  15.06.2017  and subsequent revisions vide Orders dated 28.05.2018, 29.05.2019, 04.06.2020  and 16.09.2020.  In  furtherance  of  the  aforesaid  Order,  MeitY  vide  Notification  dated 07.09.2020  has  notified  mechanism  for  calculating  local  content  for  13  Electronic Products viz., (i) Desktop PCs, (ii) Thin Clients, (iii) Computer Monitors, (iv) Laptop PCs,  (v)  Tablet  PCs,  (vi)  Dot  Matrix  Printers,  (vii)  Contact  and  Contactless  Smart Cards, (viii) LED Products, (ix) Biometric Access Control / Authentication Devices, (x) Biometric  Finger  Print  Sensors,  (xi)  Biometric  Iris  Sensors,  (xii)  Servers,  and  (xiii) Cellular Mobile Phones, for procurement to be made from locals suppliers.
12. Compulsory  Registration  Order  (CRO) : MeitY  has notified 'Electronics and Information  Technology  Goods  (Requirement  of  Compulsory  Registration)  Order, 2012' for mandatory compliance to ensure safety of Indian citizens by curbing import of substandard and unsafe electronic goods into India. 63 Product Categories have been notified under the CRO and the order is applicable on all product categories.

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