The new incentive plan — which is likely to be launched at the start of the next fiscal year — will have a corpus of Rs 10,000 crore, ET has reported. It will be an updated version of the current Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS). Currently, the SPECS scheme has a corpus of around Rs 3200-3300 crore. It may be structured to disburse funds as and when the companies invest or achieve certain milestones. At present, the SPECS scheme provides a reimbursement of up to 25% of the total capital expenditure on the project after the completion of the work on the unit.
With this revised scheme, the government is raising its bet on a small but crucial part of its chip-making ambition: the ancillary industry.
What the revised scheme aims to achieve
India’s chip-making ambitions are taking off. In addition to the ATMP (assembly, testing, marking, packaging) plants announced by Micron, Tata Electronics and Kaynes Corp, others like the HCL Group and Tamil Nadu-based Murugappa Group are also finalising their plans to enter the sector.
“To support these ATMP plants, (several) ancillary industries and component makers are coming to India and are requesting support from the government,” an official aware of the developments has told ET. The ancillary units include those providing raw materials including specialty chemicals and gases used in the process of fabrication, assembly, marking, testing, and packaging of semiconductor chips.
With America’s Micron having received necessary approvals from the centre to set up an ATMP unit at Sanand in Gujarat, there has been an influx of companies– supplying specialised chemicals, gases, integrated circuit packaging substrate, purified air and other equipment—also looking to set up allied units in the area to support the semiconductor major.The revised scheme aims to help companies interested in setting up these ancillary units.Why ancillary units are important
China’s success in becoming a chip-making giant is rooted in its developed ecosystem that supports its chip-making units. Since chip-making involves a complex value chain with no company owning all the functions in the value chain, self-reliance in chip-making is not confined to just chip-manufacturing plants but also the ancillary and components industry which is smaller in scale that chip-making plants but provides a firm ground for chip-making.
In the absence of an ecosystem of ancillary and component industry, it’s not possible to indigenise the manufacturing of chips because chip-makers will remain dependent on imports for components, etc.
Initially, India is focusing on Assembly, Testing, Marking and Packaging (ATMP) and Outsourced Semiconductor Assembly and Test (OSAT) as well as chip designing where it has an edge due to availability of design engineers. A developed ecosystem, which would include wafers, specialty chemicals, gases and materials, can prepare the ground for big chip-making plants.
For example, a stable and secure materials supply chain is imperative for the smooth functioning of the semiconductor industry. China has strategically invested in securing a reliable supply of materials, including silicon wafers, chemicals, and gases. Air Liquide, a global supplier of industrial gases, has a significant presence in China’s semiconductor ecosystem. By providing high-purity gases essential for semiconductor manufacturing, Air Liquide has contributed to the precision and reliability of semiconductor production processes, ensuring a stable materials supply chain. Similarly, GlobalWafers, a leading Taiwanese silicon wafer manufacturer, has played a crucial role in addressing the demand for silicon substrates in China’s semiconductor industry. The company’s manufacturing facilities in China have not only supplied silicon wafers for chip production but have also stimulated the growth of ancillary industries supporting wafer production and processing.
Companies like Air Liquide and GlobalWafers have been integral in sustaining the materials supply chain in China.
While manufacturing of equipment, such as photolithography machines, is at the top rung of the chips ancillary industry and involves highly advanced technology, India can begin to build the ecosystem by focusing on materials, gases and chemicals.
The semiconductor industry is highly reliant on a complex supply chain. Establishing a robust ecosystem helps mitigate risks associated with disruptions in the supply chain. A diversified and resilient supply chain ensures that the production of semiconductor devices can continue even in the face of unforeseen challenges. That’s why the government spending Rs 10,000 crore on incentivising the ancillary and components industry is critical when India is taking its first steps towards chip-making.
