US$ 10 bn package announced for semiconductor sector development

The package will provide end-to-end support towards the development of 15 compound semiconductor fab unit megaprojects

December 16, 2021

Design, display fab units, greenfield chip units and ATMP facilities are expected to be covered under the package.

Production Design and Deployment Linked Incentives will cover 50% of relevant expenditure and 4-6% of net sales by eligible parties.

85,000 engineers are to be trained through knowledge sharing initiatives that are to be rolled out in select Universities.

100 companies are expected to be benefited by the package and a revenue target of US$ 197 million has been set for 2026.

The Union Cabinet authorized a package worth US$ 10 billion (Rs 76,000 crore) to revamp the semiconductor ecosystem. The package will support a wide spectrum of operations including design, Assembly, Testing, Marking and Packaging (ATMP) facilities, greenfield chip and display fab units, and compound semiconductor units. A Product Deployment- Linked Incentive and Productive Design-Linked Incentive (DLI) for a period of five years will be in effect to cover 4-6% of net sales and 50% of expenditure respectively. Chip design companies that produce at mass-manufacturing plants are also expected to be supported by the package. Additionally, training and knowledge-sharing initiatives will be rolled out to train 85.000 engineers through Universities. 

Entities eligible for the package will be given support to the tune of 50% of the total project cost for the production of display fab units and semiconductors. In the interest of instituting compound semiconductor units, the government will also look to absorb upto 30% of capital expenditure incurred by eligible parties. Through the above initiatives, the government will look to support the establishment of 15 ATMP facilities and compound semiconductor units in total and equip close to 100 homegrown entities with the requisite financial incentives. 

A total revenue target of US$ 197 million (Rs 1,500 crore) has been set as a milestone for 2026 and at least 20 beneficiaries of the package are expected to work towards achieving it. Close to 60% of the package allocation will be directed towards funding fab and fab display megaprojects across the country. The funding is expected to make the Indian semiconductor industry more competitive at a global level. Prime Minister Modi observed that the scheme would help boost the sector’s Research & Development (R&D) as well as manufacturing capabilities.