The Ministry of Electronics and Information Technology is working on a follow up scheme for the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) that ended on March 31, 2024, said its secretary S Krishnan.

Some of the manufacturers were covered under the scheme that ended. “However, going forward, we will need another scheme to cover that and the government is working on this in the follow-up scheme,” he said while speaking at the iVP Semiconductor launch event on Saturday.

“While one fab of Tatas is coming up, we need more fabs and all the other stakeholders like supplies and equipment manufacturers. Many of those are not large companies but small. There are nearly 300 vendors who will be required to be there in close proximity. We will need to support all of that ecosystem, and that is what we intend to do,” he said.

Krishnan said there are not many jobs in the semiconductor fab, and equally important are developing units that provide support to the large units. For example, there should be many laundries to clean bunny suits that are worn inside the units. “The reason we are doing it is for strategic reasons. Globally, geo-politically, the supply chain for semi-conductor needs to be diversified. That’s partly what the pandemic also taught us. Some amount of diversification becomes important, and that’s what the Government of India is keen on,” he said.

Already, $10 billion (₹76,000 crore) was allocated for the semiconductor mission, and close to around ₹70,000 crore has already been committed. The balance that requires to be committed is significantly smaller. “We have to go back to the Ministry of Finance and ask for more money,” he said.

It is very important to have a critical ecosystem in place in the semiconductor industry. On the design side, the skill has been quite successful. It is estimated that 20-25 per cent of all the design workforce globally is based in India. However, when it comes to manufacturing it is entirely different. Semiconductor is all about precision manufacturing, zero error and getting everything down to the atomic level. That is the level to achieve precision. “That’s something that we need to learn from Taiwan, Korea and Japan,” he said.

Electronics are a global value chain. No one country in the world produces every piece of component of any piece of electronics. There are various items that cross borders 70 to 80 times.

India’s total electronics export is around $110 billion, and a lot of that happens nearly 50 km away from Chennai in and around Sriperumbudur. In the exports, value addition is about 18-20 per cent due to assembly and labour factors. This is extremely significant for India, which is able to give so many jobs to people. However, mostly it is an assembly exercise building on the arbitrage in terms of labour cost. “While this gives lots of employment, the risk is that if we do not deepen the value chain in India, it may not stay very long in India and move to another country that offers cheaper labour,” he said.

“If we have to deepen the value chain and make India an important segment in the sector, we need to build on this and make sure that more of the components are manufactured in India,” he added.

“Component manufacturing is the next stage where we really need to work. That’s where The Government of India, the Ministry of Electronics and IT and various state governments need to work together and that is a space which the Centre is exploring very seriously,” he said.

Making circuits is important. If a new semiconductor unit comes, nearly 75 per cent of the cost is met by the governments - both Centre and States. This is all the more reason that we want assurance of success. We want to judge that the project actually works. Unlike other subsidies which are paid by the government after the investment is completed and production commences, this is a subsidy based on a pari passu basis and paid as the project is implemented. “We are as interested in the success of the project as the original investors themselves. Governments have more taxpayers money at stake in this programme. That is the level of importance the government is giving to the semiconductor programme, he said. “What India is funding is significantly higher than what is offered by other countries,” he said.

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