India has been chasing tech companies to set up a base in the country and start manufacturing products locally. While the Narendra Modi led government has been in favour of boosting domestic manufacturing, the recent Sino-Indian border clashes gave the required impetus to the federal government's plans.
Thus, apart from banning various Chinese applications, there is a strong focus on Make in India and its purview isn’t limited to a handful of smartphone makers, but also includes EV companies as well.
As a result of this increased focus and PLI scheme, we have companies like Apple upscaling its manufacturing facilities within the country which has not only resulted in cheaper iPhones but India is fast emerging as an alternative to China as a manufacturing hub.
Though, a major missing cog in the wheel is the lack of chipmaking facilities in the country. This means that despite all the efforts to ensure that smartphones are being made within the country, the reliance on chipmakers from Taiwan and China is still a hindrance. Another round of trade war with China or shortage of chips could mean that the Indian production units of global tech companies could come to a grinding halt.
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However, the federal government is reportedly planning to launch another scheme to attract major chip-making companies to set up their facilities in India. According to a Reuters report, the Indian government is offering $1 billion in cash to these companies and is ready to offer them the required infrastructure as well. These locally manufactured chipsets will be used in a variety of products like CCTV cameras, IoT devices, and other 5G equipment and will be designated as “trusted sources” under the new procurement policy.
The report quotes an unnamed senior government official who states, “We’re assuring them that the government will be a buyer and there will also be mandates in the private market (for companies to buy locally made chips).” As of now, the government is in touch with industry experts to draft the disbursement of this cash incentive.
Will $1 Billion be enough though?
With India bullish about electric vehicle production and adoption apart from inviting various other tech companies to set up their manufacturing base here, chipsets would be the primary requirement for these companies.
For those unaware, it is not the first time that the government has revealed its plans to take on Chinese dominance of semiconductor manufacturing. The earlier attempt, however, fizzled out due to the lack of infrastructure, bureaucracy, unstable power supply and more.
The government seems to be committed to the cause and is readying the plan from the ground up if we are to believe the sources. It plans to offer waivers on customs duty, research and development expenses and interest-free loans.
And while, $1billion of cashback may sound less at the start especially for setting up a semiconductor manufacturing facility, however, both the central and state governments may end up offering various other benefits including SEZ zones, discounted rates on electricity, and other tax benefits that in total could end up way more than the amount initially announced.
That said, the entire process of setting up a chip fabrication unit may take more than a couple of years, hence the government is moving ahead with a long term goal in mind.
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