Union Cabinet Approves Major Changes To Semiconductor PLI Scheme, Offers 50 Per Cent Incentives For Chip Fabs Across Technology Nodes

The Union Cabinet today (Sep 21) cleared significant changes to the production-linked incentive (PLI) scheme for the manufacturing of semiconductors.

The PLI scheme for the development of the semiconductors and display manufacturing ecosystem in India was announced by the Centre in December last year with an outlay of Rs 76,000 crore.

The modifications approved today by the Union Cabinet in the PLI Programme will now provide uniform fiscal support of 50 per cent of the project cost across all technology nodes for setting up Semiconductor Fabs.

Given the niche technology and nature of compound semiconductors and advanced packaging, the modified programme will also provide "fiscal support of 50 per cent of capital expenditure in pari-passu mode for setting up of compound semiconductors / silicon photonics / sensors / Discrete semiconductors fabs and ATMP/OSAT," a government statement noted.

The modified incentive programme is expected to expedite semiconductor and display manufacturing investments in India.

The government also said that the modification to the initially announced incentive is based on its assessment that mature technology nodes of 45nm and above will continue to garner high demand driven by automotive, power and telecom applications. The 45nm and above market segment still constitute around 50% of the total semiconductor market.

Based on discussion with potential investors, the government expects that work on setting up the first semiconductor facility will commence soon, the statement added.

The Semiconductor PLI programme aims to provide attractive incentive support to companies/consortia engaged in Silicon semiconductor fabs, display fabs, compound semiconductors / silicon photonics / sensors (including MEMS) fabs, semiconductor packaging (ATMP / OSAT), Semiconductor Design.

The development comes as India's semiconductor component market is likely to reach $300 billion in cumulative revenues by 2026 as the government's Production Linked Incentive (PLI) and 'Make in India' schemes will help domestic sourcing of semiconductor components in the coming years.

In a win for the government's chip PLI scheme, Vedanta and Foxconn signed an agreement with the Gujarat government to set up a semiconductor and display fab in the state with an investment of over $19 billion.

In May this year, the international semiconductor consortium ISMC announced that it will invest $3 billion to build a fab in India in partnership with Israel-based Tower Semiconductor (which is among the top 10 pure-play foundries of the world and is in the process of being acquired by Intel).

The consortium signed a memorandum of understanding (MoU) with Karnataka to set up a semiconductor manufacturing plant near Mysuru. It is reported to be seeking approval and grant of the incentives by August to move forward with project execution.