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India announced in December 2021 its latest US$10 billion PLI incentive scheme for manufacturing semiconductor in India. The amount uses up one-third of the combined amount of India's 13 PLI subsidies and EMC 2.0 subsidy, marking the government's ambition to build its own local semiconductor supply chain.
The Indian government plans to hold no more than 49% stakes in wafer foundries and 8G LCD panel makers with monthly production capacity of 60,000 sheets or 6G AMOED panel makers with monthly capacity of 30,000 sheets. By owning part of the shares, the government will subsidize at least 50% of the "planned" expenditures.
The subsidy scheme opened on January 1 for two wafer fabs using 65nm or more advanced processes, and two panel makers, with a goal of helping local electronics sector grow to the size of US$400 billion by 2025.
Known for putting up high barriers for foreign investment, trade, and business operation, India now relies 100% on imported semiconductors and the subsidies are meant to promote self-reliance.
Aside from two wafer fabs and two panel makers, the PLI scheme for semiconductor includes 15 suppliers of compound semiconductor, silicone photonics, sensors, ATMP, OSAT, etc, and 100 IC design houses. Local conglomerate Tata Group has said it will be applying for the subsidy.
Some major foreign chip designers such as Intel and AMD have been expanding in India, but they are preemptively illegible for the subsidies. The way India sets the rules is not uncommon, considering that semiconductor has sparked much geopolitical tension aroud the world.
Outlook for the coming years
In an interview with Bloomberg, Indian Minister of Electronics and IT Ashwini Vaishnaw said at least 10 to 12 chip makers will begin production in two to three years. Panel fabs are likely to enter production or complete construction around the same time, while at least 50 to 60 IC design houses will start operation.
COO at KPMG India Global Neeraj Bansal also told Business Today that India's demand for semiconductor grows at an annual pace of 15% and nearly 40% of the imported semiconductors are from China. Demand will only grow higher. He added that chip makers will likely establish fabs in nearby carmaking, handset-making hubs such as Gujarat, Maharashtra, Tamil Nadu, and Uttar Pradesh.