Meity to flag Customs delays in chip shipments amid industry concerns

"Some industry participants have flagged a couple of cases where Customs officials at the port of entry insisted that the packaging of precision tools and raw materials be opened," said sources

The Ministry of Electronics and Information Technology (Meity) will write to the Ministry of Finance, flagging the semiconductor industry’s concerns regarding delays in clearing shipments of precision tools, raw materials, speciality chemicals, and gases needed to run chipmaking and packaging units, sources told Business Standard.

 

“We have been made aware that some of these shipments have been held back for weeks due to minor procedural issues such as incorrect HSN (Harmonized System of Nomenclature) codes,and the incorrect tagging of the tool or raw material being imported,” a senior government official said.

 

Apart from incorrect HSN codes and tagging, some industry participants have also flagged a couple of cases where Customs officials at the port of entry insisted that the packaging of precision tools and raw materials be opened, a second official said.

 

This problem needs to be solved soon, as imports of several precision tools, raw materials, and speciality chemicals used in the chipmaking process are likely to rise as the second phase of the India Semiconductor Mission rolls out, the official said. 

 

“Most of these precision tools and some of these raw materials can only be opened in clean rooms. We will write to them (finance ministry) urging a retraining of on-ground customs officials so that they are able to understand these crucial aspects,” one of the officials quoted above said.

 

An email sent to the finance ministry and the Central Board of Indirect Taxes and Customs (CBIC) did not elicit any response.

 

Apart from writing to the finance ministry about the issues with delays in Customs clearances for products needed for the semiconductor industry, the IT ministry is also likely to check for the possibility of a 'customs green channel’ for these precision tools and raw materials so that the import time is reduced to the minimum possible period, a third official said.

 

“This was requested by some of the countries in their respective roundtable meetings with us (the IT ministry). For a green channel to be established, there are several processes and procedures that have to be followed. We will write to the finance ministry and see what can be done,” the official said.

 

A report released by the government think tank NITI Aayog in May this year projected that India’s semiconductor demand, currently hovering around $37 billion, is likely to reach $206 billion over the next 10 years by financial year 2034-35. The report estimated that demand growth will be driven primarily by a surge in the need for high-performance, quantum, and edge use-case computing.

 

Currently, India imports nearly 95 per cent of the semiconductor chips it needs each year, with the total value of these imports at nearly $30.3 billion in financial year 2024-25 (FY25).

 

“With demand for advanced technologies expected to rise, a substantial increase in semiconductor imports is indispensable. India’s imports of semiconductor products grew at a CAGR (compound annual growth rate) of 23 per cent between FY17 and FY25, and if this pace persists, the annual import cost could increase to $240 billion by 2035,” the NITI Aayog report estimated.

 

To offset the rising import bill and ensure a technological leadership in the semiconductor space, India must invest in frontier research areas like gallium nitride or silicon carbide (GaN/SiC) devices, 2D materials, quantum technologies and neuromorphic computing, the NITI Aayog report had suggested.