The reduction in central capital support for semiconductor fabrication projects from 50% under the first phase of the India Semiconductor Mission (ISM) to 40% under Semicon 2.0 will not make India less attractive to global investors, said the minister of Electronics and IT Minister Ashwini Vaishnaw on Monday.
His remarks came after the government notified the detailed Semicon 2.0 scheme, aimed at developing India’s semiconductor ecosystem beyond the setting up of fabrication and packaging units and building capabilities across the entire value chain. The scheme provides support for the manufacture of semiconductor-grade wafers, substrates, chemicals, gases, photomasks and photoresists, besides semiconductor equipment, components and refurbished equipment.
For large 300-mm silicon fabs, Semicon 2.0 provides capital support of 40% of eligible expenditure, subject to a minimum investment of Rs 20,000 crore. Compound semiconductor, photonics and sensor fabs will be eligible for support of 35 per cent. Several other categories, including semiconductor equipment and components, will be eligible for capital expenditure support of up to 30%, with additional production-linked incentives available for some equipment manufacturers.
Talent development has also been included as a separate pillar under the scheme, covering chip designers, researchers, fab technicians and operators. Projects aimed at developing talent will be eligible for support of up to 75 per cent. Addressing reporters after the notification of the scheme, Vaishnaw said global semiconductor companies had moved from “serious doubt” in 2022 over India’s ability to build a chip ecosystem to “confidence” in the country as a long-term investment destination. “The incentive structure is an incidental part. It is not the core of the entire programme,” Vaishnaw said, arguing that companies assess India based on its potential to build and expand operations over the next 20-30 years.
He pointed to the pace of execution under ISM 1.0, saying some projects had moved from groundbreaking to commercial production within 13 months, while approvals in some cases were completed within 90 to 200 days. Vaishnaw said Semicon 2.0 would focus not merely on fabs but on building a wider semiconductor ecosystem, including equipment, gases, chemicals, substrates, consumables, precision components and chip design.
“If we have that in a country, then the growth is there for the next 20 years. If we don't have that, then the growth can fizzle out,” he said. A major shift under Semicon 2.0 is its emphasis on the upstream ecosystem, which the government sees as critical to sustaining the growth of semiconductor manufacturing in India.
Vaishnaw also said investors would assess the overall incentive package available in India rather than looking at the Centre’s contribution in isolation.
“When companies consider India's incentives, how do they look at the combination of central incentives, state incentives, power subsidies and talent advantages?” he said.