Setting Up Semiconductor Units in India: Schemes and Processes

This article explains what semiconductors are and where they are used; schemes and processes involved in setting up semiconductor units in I

In December 2021, the Government of India announced the India Semiconductor Mission (ISM), a comprehensive programme for the development of sustainable semiconductor and display ecosystem. This involves an outlay of over $10 billion and the government has declared incentives for every bit of the supply chain, including electronic components, sub-assemblies and finished goods.

This is a significant step considering that India imports 100% of its semiconductor chips and the country’s semiconductor consumption is rising at the rate of 15% at the back of the nation’s flourishing electronics manufacturing industry.

What are semiconductors?

Semiconductors fall somewhere in between insulators and conductors. They function mainly to control the electric current. Semiconductors or chip sets are used widely in modern electronic devices and technologies, with an array of application ranging from electronic products and IT hardware to defence technology, industrial electronics, medical electronics, automation, and the Internet of Things. 
There are two types of semi-conductors:

1. Intrinsic semiconductors:

These are pure semiconductors made of silicon or germanium. 

2. Extrinsic Semiconductor: 

These have higher electrical conductivity due to the impurities mixed in them (process called doping) like gallium, arsenide or silicon carbide based on the application or utilization.

Common semiconductor devices mainly include: Two terminals (diode, gunn diode, laser diode, schottky diode, light emitting diode, photocell, solar cell etc.); three terminals (bipolar transistor, thyristor, TRIAC, field-effect transistor, Darlington transistor, etc.); and four terminals (photo coupler, hall effect sensor).

It is to be noted that success in the semiconductor industry depends on creating smaller, faster and cheaper products.

Opportunities for setting up semiconductor units in India: Schemes under ISM

A total of $7.5 billion has been sanctioned under (1) Production Linked Incentive (PLI) for large-scale electronics manufacturing and IT hardware, (2) Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), and (3) Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme. There is also the PLI for a quantum of $13 billion that has been sanctioned for allied sectors that include Automotive Cells Company (ACC) batteries, auto components, telecom and networking products, solar photovoltaic (PV) modules, and white goods.

DLI Scheme: Eligibility criteria, deadlines

The Ministry of Electronics and Information (MeitY) is obtaining applications from 100 domestic companies, start-ups and Micro, Small and Medium Enterprises (MSMEs) under its Design Linked Incentive (DLI) Scheme. There are three components in the scheme:
  • Chip Design Infrastructure Support
  • Product Design Linked Incentive
  • Deployment Linked Incentive
The Centre for Development of Advanced Computing (C-DAC), a scientific society operating under MeitY, will serve as the nodal agency for implementation of the DLI scheme. This scheme aims to nurture at least 20 domestic companies involved in semiconductor design and facilitate them to achieve a turnover of more than INR 15 billion in the next five years. A portal has been made available for inviting online applications from 1 January 2022 to 31 December 2024.

The Ministry has announced guidelines for execution of the scheme and a semiconductor portal has been prepared for accepting and processing applications from interested companies / consortia / joint ventures. The applicants can find the guidelines of the DLI Scheme on the portal and register themselves for availing support under the scheme.

Eligibility criterion for companies / consortia / joint ventures proposing to set up a silicon CMOS BASED SEMICONDUCTOR Fab in India for manufacturing Logic / Memory / Digital ICs / Analog ICs / Mixed Signal ICs / SoCs:
  • Technology:
  1. Node size- 65/45/28 mm or advanced (including intermediate nodes),
  2. Wafer size- 300 mm,
  3. Installed Capacity- 40,000 Wafer starts per month (WSPM).
  • Operational experience:
  1. Own and operate 65/45/28mm (including intermediate nodes) or advanced node process(es) in Silicon CMOS Semiconductor Fab; or
  2. Own or possess production grade licensed technologies through licensing or development.
  • Capital investment threshold: Minimum capital investment of Rs.20,000 crores.
  • Revenue threshold: Minimum revenue of Rs.7,500 crores (including group companies in Electronic Systems Design and Manufacturing – ESDM – in any of the three financial years preceding the year of submission).

Support extended by the Government

The Government of India has started receiving applications from 1 January 2022 from industry players for setting up semiconductor fabs (fabrication plants) and display units. The support it extends to the industry players include:
  • 50% of project cost on pari-passu basis would be provided by the Government to applicants found eligible and with the technology as well as capability to implement these extremely capital and resource exhaustive projects.
  • An extended fiscal support of 30% of capital expenditure to permitted units will be extended for the establishment of Compound Semiconductors / Silicon Photonics / Sensors (including MEMS) Fabs and Semiconductor Assembly, Testing, Marking and Packaging (ATMP) / Outsourced Semiconductor Assembly and Test (OSAT) facilities.
  • The Government will offer support for over a period of six years, which may be extended based on the approval by the MeitY.
Fifteen organizations of Compound Semiconductors and Semiconductor Packaging are likely to be launched with the government’s support under this scheme.

Also, the Government will function in proximity with the state governments to form High-Tech Clusters with necessary infrastructure in terms of land, semiconductor grade water, high quality power, logistics, and research ecosystem.

The Union Cabinet has also permitted the MEITY to take the required steps for modernization and commercialization of the Semiconductor Laboratory (SCL) located in Mohali.  


While declaring the schemes for the semiconductor industry in India, the MeitY mentioned that the Indian semiconductor market, estimated around $15 billion in 2020, is expected to grow to around $63 billion by 2026. The Ministry anticipates that by 2030 the semiconductor market will be driven by wireless communications, consumer electronics and automotive electronics with 24%, 23% and 20% of the market share respectively.

The Semiconductor Laboratory (SCL), Mohali; Gallium Arsenide Enabling Technology Centre (GAETEC), Hyderabad; and Society for Integrated Circuit Technology and Applied Research (SITAR), Bengaluru are a few of India’s current semiconductor amenities. Both semiconductors and display manufacturing are capital and technology-intensive with long incubation and payback periods. Hence, India is searching for both capital support and technological partnerships.

In a noteworthy move, the Indian Government is slated to be in discussions with Taiwan to establish a semiconductor manufacturing facility in India. Several sites have been procured for this purpose.

Apart from Taiwan, there also appears to be some domestic interest in the semiconductor industry. The Vedanta Group revealed its strategies to make an investment of $15 billion on display and semiconductor manufacturing in India for a period of five to 10 years. The Tata Group on the other hand is said be in discussion with few international semiconductor companies like the Taiwanese TSMC and UMC for chip manufacturing in India. It is reported that with an investment of $300 million the Tata Group wishes to construct an outsourced semiconductor OSAT facility. Tamil Nadu, Karnataka and Telangana are identified as possible sites for the facility.  Several other countries are also entering the Indian market.  The US chip-maker Intel has shown interest in founding a semiconductor manufacturing plant in India.