Eye on supply chain, Cabinet approves Rs 1.27 lakh crore semiconductor push, Pg7

Key Highlights:

• The Union Cabinet approved India Semiconductor Mission (ISM) 2.0 with an outlay of Rs 1.27 lakh crore for six years.
• The initiative focuses on subsidizing the supply chain for chip manufacturing, including gases and chemicals.
• A Rs 62,500-crore mobile phone manufacturing push, a five-year follow-on to the Production Linked Incentive (PLI) scheme, was also approved.
• ISM 2.0 offers reduced subsidies compared to ISM 1.0, with 40% for silicon plants and 35% for other units.
• India aims to meet 70-75% of domestic chip demand by 2029 and be among the top semiconductor nations globally by 2035.
• ISM 1.0 led to commitments of Rs 1.64 lakh crore and the approval of 12 chip plants, with some already in commercial production.

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Detailed Insights:

• ISM 2.0 aims to attract companies producing essential commodities like gases and chemicals required for chip production.
• The mobile phone manufacturing push is a continuation of the successful PLI scheme that significantly localized smartphone production in India.
• Subsidies under ISM 2.0 are differentiated: 40% for silicon plants, 35% for other units, 38% for advanced packaging, and 25% for conventional packaging.
• The scheme also includes government subsidies for research and development and talent development in the semiconductor sector.
• India's strategic move into semiconductor production aims to integrate into the global chip supply chain and enhance domestic value addition in electronics.
• ISM 1.0, launched in 2021, focused on building a full-stack chip ecosystem from fabrication to design and display manufacturing.
• Approved chip plants under ISM 1.0 include those by Micron Technology and Tata Electronics in partnership with PSMC.
• The new mobile manufacturing scheme targets cumulative production of Rs 39 lakh crore and aims to create 60,000 direct jobs.
• It provides incentives for domestic sourcing of key components and an additional incentive for building Indian brands through design and R&D.
• The previous PLI scheme for smartphones helped increase local value addition to 24% and created nearly 2 lakh jobs.

Key Concepts Involved:

• India Semiconductor Mission (ISM): A government initiative to build a comprehensive semiconductor ecosystem in India, from design to manufacturing.
• Production Linked Incentive (PLI) Scheme: A government scheme offering incentives to companies for increasing domestic manufacturing and exports in specific sectors.
• Semiconductor Fabrication (Fab): The process of manufacturing integrated circuits (chips) on semiconductor wafers.
• Assembly, Testing, Marking, and Packaging (ATMP): The final stages of semiconductor manufacturing, where chips are assembled, tested, and packaged for use.