Incentivise buyers to purchase India-made chips, says industry body

India has ten semiconductor projects in the works, spanning fabs, outsourced semiconductor assembly and test (OSAT) units and assembly, testing, marking and packaging (ATMP) facilities

The Centre needs to incentivise buyers to buy products from India’s fledgling semiconductor companies, Indian Electronics and Semiconductor Association (IESA), one of the leading industry bodies in the sector, said. It added that without this, it would be difficult for them to scale up manufacturing.

 

India has 10 semiconductor projects in the works, which spans fabs, outsourced semiconductor assembly and test (OSAT) units and assembly, testing, marking and packaging (ATMP) facilities. That includes companies such as Micron, Tata Electronics, CG Power, Kaynes, and a joint venture (JV) between HCL and Foxconn.

 

“It takes about three-five years to design, make prototypes and manufacture. So, these design linked incentive (DLI)-based startups, whatever chips they are developing, need to find the right set of customers and ramp up manufacturing,” Ashok Chandak, president of IESA, told Business Standard during an interaction at the Bengaluru Tech Summit last week.

 

The first phase of the India Semiconductor Mission has been largely on track and the $10 billion outlay has been used. The critical question right now remains convincing buyers to purchase India-made and designed chips and incentivising them to do so.

 

“What would be some of the reasons why buyers should potentially look forward to? Most of these buyers have their product design outside India. So for them, if something has to be taken from here, it has to be a replacement. So, if you try to replace one with another, obviously the buyer would say, what is the value I get? Whether I get it at a cheaper price or better functionality? Or do I get a good reliable brand? Now, all three would be a challenge right now as our startups have not created the brands yet,” he added. 

 

When asked what could be some ways to nudge a buyer or the types of incentives the industry would want, Chandak said the association does not have a concrete answer. However, a proposal has been sent to the government, which will be hopefully addressed in the second phase of the mission.

 

He added, “It depends on the government whether they agree or not. What we are saying is you give incentive to the buyer rather than giving incentive to a seller, which is a startup or a chip maker.”

 

India’s domestic chip demand is projected to touch $103 billion by 2030, according to IESA estimates.

 

On the design side, the government has also updated the ₹1,000-crore DLI scheme, which supports domestic companies, startups, and micro, small and medium industries (MSMEs) in semiconductor design.

 

The ministry of electronics and information technology (MeitY) approved 23 chip design projects as of August, while 72 companies have been given access to industry-grade electronic design automation (EDA) tools to accelerate chip design.

 

As of July 30, ₹803 crore worth of projects were approved.