We know that the world has been depending on Asian regions like China and its neighbouring state Taiwan for a vast majority of the supply of electronics hardware manufacturing. With the coming of COVID-19 pandemic, the supply chains have been constrained, and many large nations are worried about the lack of electronics chips manufacturing. The US too has been considering building up factories within the domestic border and moving away from its dependence on Asia, according to reports.
If you look at India, the government attaches high priority to electronics hardware manufacturing as it is one of the fundamental tenets of programs such as Make in India. But there is clearly a dependence on other nations for semiconductor chips as there is a lack of electronic components manufacturing ecosystem in India. But, the government has recognised the development of the supply chain is critical for the manufacturing of electronic products with substantial domestic value creation.
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Attracting Investments Into India’s Electronic Manufacturing
To attract investments in the space, the Modified Special Incentive Package Scheme (M-SIPS) was announced, give monetary incentives support to counterbalance the high upfront expenses in building electronic component manufacturing units, thereby attracting investments from interested companies.
This scheme was free to receive applications till 31 December 2018 for new projects and provided a subsidy for investments in capital expenses for setting up electronics manufacturing facilities. M-SIPS had, in fact, has played a decent role in promoting investments in electronics manufacturing in India so far.
Now, there is another program to boost investments in the electronic manufacturing sector. Known as Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) introduced in April 2020, the program is aimed to offer monetary stimulus of 25% of capital expenditure for the manufacturing of goods that form the supply chain of electronic goods.
The scheme will balance the lack for domestic manufacturing of components and semiconductors, and aims to grow the electronics manufacturing supply chain ecosystem in India. There are various classes of goods eligible for incentive under SPECS, ranging from a Minimum Investment Threshold Limit of INR 5 crore to Minimum Investment Threshold of INR 1000 crore, including semiconductor wafers and Semiconductor Integrated Chips (ICs).
With the newly announced era of Internet of Things (IoT), directing that the new generation of interconnected devices be capable of advanced computing, the Indian semiconductor industry is set for a solid rise with fresh prospects provided India’s infrastructure and funding issues for electronics chip manufacturing are met.
At the moment, almost all the semiconductor demand is satisfied by imports from nations like the USA, Japan, and Taiwan. In the semiconductor area, India has a large human-capital pool, which is focused on the design side, not manufacturing. Hopefully, this may change in the coming years.