India’s Rs 76,000 crore semiconductor scheme turns out too juicy for INTEL to ignore

• Intel is more focused on semiconductor design as East Asian countries took over manufacturing
• The company is quite impressed with the government PLI for semiconductors under which the government will cover 50 per cent of capital expenditure on setting up the plant. 
• However, with this attempt, it seems the country will get at least two semiconductor fab plants and one display fab plant.

Intel Corporation, the pioneer of the semiconductor industry, is actively considering a semiconductor manufacturing plant in India after the Modi government’s 10 billion dollar incentives announcement. Founded in 1968 by Robert Noyce and Gordon Moore (Moore’s law fame), the company revolutionized the semiconductor industry with x86 series of processors. 

Although today Intel is more focused on semiconductor design as East Asian countries took over manufacturing, it is still among the largest semiconductor companies in the world with annual revenue of 78 billion dollars. If Intel sets up a semiconductor manufacturing plant in India, it will give a huge boost to the country’s semiconductor mission and other companies will also move manufacturing plants in India.

The company is quite impressed with the government PLI for semiconductors under which the government will cover 50 per cent of capital expenditure on setting up the plant. 

“Congrats to @GoI_MeitY @AshwiniVaishnaw @Rajeev_GoI for Semiconductor design & manufacturing incentives for India as hub for electronics & semiconductors. Glad to see a plan laid out for all aspects of the supply chain: talent, design, manufacturing, test, packaging & logistics,” tweeted Randhir Thakur, SVP and the president of Intel Foundry Services.

The Minister of Electronics and IT, Ashwini Vaishnav replied to the tweet with “Intel – welcome to India”.

Under the National Semiconductor Mission, the government has prepared a holistic plan to promote the manufacturing and design of semiconductors in India. Under the Mission, the government plans to bear 50% of capital expenditure cost on semiconductor fab and display fab units, 30% cost on compound semiconductor fabs, 4-6% design lined incentive (DLI) for semiconductor design companies and modernization of Semiconductor Laboratory in Chandigarh.

India is already a very powerful player in semiconductor design, and some of the biggest companies of the sector including Texas Instruments, NXP Semiconductors have design facilities in India.

However, India has so far only one semiconductor manufacturing plant at Chandigarh, that too government-run and very inefficient. The country imports semiconductors worth more than 15 billion dollars every year from countries like China, Taiwan, South Korea, and the United States.

India, despite being a low-wage and high skilled country, could not have a semiconductor foundry because the government in the country was not willing to spend money on manufacturing plants. Countries around the world succeeded in semiconductor manufacturing only with active government support, but in India, 10 billion dollars was too expensive for the government to get a semiconductor plant.

The previous three attempts (2007, 2013, and 2017) failed in setting up a semiconductor manufacturing plant in India because incentives were too little for the companies. The country recognized the importance of the semiconductor industry with the ongoing chip shortage which put many industries including automobiles on a halt.

The people who have ordered cars many months ago are not getting delivery because the automobile companies are facing a shortage of chips which are now an essential part of modern automobiles. 

However, with this attempt, it seems the country will get at least two semiconductor fab plants and one display fab plant. None of the global companies has complained about incentives being less than required and most of them praise the holistic approach the government has taken.

If the country succeeds in getting semiconductor manufacturing plants in this attempt, the name of the Modi government will go down in history given the huge importance of the industry, which will only increase in the coming decades. The name of Prime Minister Modi will be written in golden letters by future generations of India’s electronics sector entrepreneurs for successfully getting and chip manufacturing plant in India if the plan succeeds.