India plans $20B semiconductor incentive scheme for chipmakers
What's the story
India is preparing a new $20 billion incentive scheme to attract global and domestic semiconductor manufacturers. The Ministry of Electronics and Information Technology (MeitY) has sought approval from the finance ministry for this plan, which will be presented to the Union Cabinet later. A final decision is likely by the end of 2025, when the first phase of India's Semiconductor Mission (ISM) will also conclude.
Evaluation process
MeitY preparing report on ISM phase-1 results
MeitY is currently preparing a detailed report on the results of ISM's first phase, comparing it with similar global initiatives. The finance ministry has requested this economic projection document from MeitY, looking for clarity on returns from ISM's initial tranche and how India compares with other regions. This comes as countries like the US, EU, China, Japan and South Korea have announced multibillion-dollar support for chipmakers through grants and tax breaks.
Past initiatives
Finance ministry skeptical about previous $10 billion semiconductor push
The finance ministry has expressed doubts over the sustainability of India's previous $10 billion semiconductor push announced in 2021. As per the ministry, it was influenced by protectionist policies similar to those of US President Donald Trump's trade policies. However, during the recent years, New Delhi has also approved an $11-billion fab by Tata Electronics with Taiwan's Powerchip Semiconductor Manufacturing Co., a Micron testing and assembly facility, as well as projects from CG Semi and HCL Technologies.
Competitive edge
MeitY defends India's semiconductor incentive packages
MeitY has defended India's semiconductor incentive packages, arguing that while they may be smaller than those of the US, the country's policy predictability and openness give it a unique competitive advantage in attracting long-term investment. The second phase of ISM, dubbed ISM 2.0, proposes a $20 billion outlay across the entire semiconductor value chain with four focus areas: chip design, semiconductor components, new materials and India's first display fab unit.
Strategic priorities
ISM 2.0 aims to nurture local champions in chip manufacturing
ISM 2.0 also focuses on scaling up the fabless design ecosystem, building advanced fabs, nurturing local champions in chip manufacturing and enabling start-ups to develop everything from household appliance sensors to telecom network chips. The design-linked incentive (DLI) scheme is at the heart of this vision with industry experts stressing its importance for India to secure a strong position in the global semiconductor race.