• The Union Cabinet, chaired by the Prime Minister Narendra Modi, was apprised of a Memorandum of Understanding (MoU) signed on November 21, 2023 between India and the European Commission on semiconductors. 

• Given the global nature of the semiconductor supply chain, international cooperation is an important element to achieve a resilient semiconductor ecosystem. This will require collaborations with strategic partners.

• The MoU sets out how the EU and India will cooperate to build robust semiconductor supply chains and work together on innovation.

• It aims at increasing the resilience of semiconductors value chain in India and EU and covers cooperation in wide areas covering research and innovation, talent development, partnerships and exchange of market information.

• Both sides agreed to add the semiconductor ecosystem as one of the sectors for cooperation under the EU-India TTC Working Group on Strategic Technologies, Digital Governance and Digital Connectivity.

Importance of semiconductors

• Semiconductor chips are the essential building blocks of digital and digitised products. From smartphones and cars, through critical applications and infrastructures for healthcare, energy, communications and industrial automation, chips are central to the modern digital economy. 

• Recent global semiconductors shortages forced factory closures in a wide range of sectors from cars to health care devices. In the car sector, for example, production in some European countries decreased by one-third in 2021. This made more evident the extreme global dependency of the semiconductor value chain on a very limited number of actors in a complex geopolitical context.

• The Indian semiconductor market, worth $15 billion in 2020, is estimated to reach $63 billion by 2026.

Semicon India Programme with an outlay of Rs 76,000 crore

• The government is very focused on its important objective of building the overall semiconductor ecosystem and ensuring that it catalyses India’s rapidly expanding electronics manufacturing and innovation ecosystem. 

• In December 2021, a comprehensive programme for the development of semiconductors and display manufacturing ecosystem in India was approved by the government with an outlay of Rs 76,000 crore. 

• The Modified Programme for Semiconductors and Display Fab Ecosystem (also known as Semicon India Programme) includes various schemes to attract investments in the field of semiconductors and display manufacturing.

• Semicon India Programme was conceived following the success of Digital India Programme and Make in India Programme in electronics manufacturing sector. 

• The schemes have laid a strong foundation for the Semicon India Programme thereby making the country an internationally conducive and competitive destination for semiconductor and display manufacturing.

Semiconductor Fabs and Display Fabs: The modified schemes for setting up of semiconductor fabs and display fabs in India shall extend fiscal support of 50 per cent of project cost on pari-passu basis to applicants who are found eligible and have the technology as well as capacity to execute such highly capital and resource intensive projects. Fabs are short for fabrication plants. The government will work closely with state governments to establish high-tech clusters with requisite infrastructure in terms of land, semiconductor grade water, high quality power, logistics and research ecosystem to approve applications for setting up at least two greenfield semiconductor fabs and two display fabs in the country.

Compound Semiconductors/Silicon Photonics/Sensors (including MEMS) Fabs/ Discrete Semiconductor Fabs and Semiconductor Assembly, Testing, Marking and Packaging (ATMP) / OSAT facilities in India: The modified scheme shall extend fiscal support of 50 per cent of capital expenditure on pari-passu basis to applicants who are found eligible and have the technology to execute such projects. At least 20 such units of compound semiconductors and semiconductor packaging are expected to be established with government support under this scheme.

Semiconductor Design Companies: The Design Linked Incentive (DLI) Scheme shall extend product design linked incentive of up to 50 per cent of eligible expenditure and product deployment linked incentive of 6 per cent and 4 per cent on net sales for five years. Support will be provided to 100 domestic companies of semiconductor design for Integrated Circuits (ICs), chipsets, System on Chips (SoCs), systems & IP cores and semiconductor linked design and facilitating the growth of not less than 20 such companies which can achieve turnover of more than Rs 1500 crore in the coming five years.

Semi-conductor Laboratory (SCL): The ministry of electronics and information technology will take requisite steps for modernisation and commercialisation of Semi-conductor Laboratory (SCL) in Mohali. The ministry will explore the possibility for the Joint Venture of SCL with a commercial fab partner to modernize the brownfield fab facility.

India Semiconductor Mission: In order to drive the long-term strategies for developing a sustainable semiconductors and display ecosystem, a specialised and independent ‘India Semiconductor Mission’ has been set up. The India Semiconductor Mission will be led by global experts in semiconductor and display industry. It will act as the nodal agency for efficient and smooth implementation of the schemes for setting up of Semiconductor and Display Fabs.

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