We know that the world has been depending on Asian regions like China and its neighbouring state Taiwan for a vast majority of the supply of electronics hardware manufacturing. With the coming of COVID-19 pandemic, the supply chains have been constrained, and many large nations are worried about the lack of electronics chips manufacturing. The US too has been considering building up factories within the domestic border and moving away from its dependence on Asia, according to reports.

If you look at India, the government attaches high priority to electronics hardware manufacturing as it is one of the primary pillars of both “Make in India” and “Digital India” plans of the Government of India. But, the electronics manufacturing industry in India presently faces a disability of about 8 – 10% in comparison to other growing economies in different types of electronics manufacturing.

The reason is primarily because of the lack of electronic components manufacturing ecosystem in India. Significant growth of domestic electronics manufacturing has occurred on account of the assembly of finished products from imported electronic components, mostly serving to the local demand. But, the government has recognised the development of the supply chain is required for the manufacturing of electronic products with more eminent domestic value addition. 

Last year, the vision of National Policy on Electronics 2019 (NPE 2019) was notified on 25 February 2019 is to put India as a global hub for Electronics System Design and Manufacturing (ESDM) by promoting and driving capacities in the nation for producing core components, including chipsets, and building an environment for the industry to contend globally. 

Attracting Investments Into India’s Electronic Manufacturing 

To attract investments in the space, the Modified Special Incentive Package Scheme (M-SIPS) was created to give monetary incentives to support to offset the high upfront cost in establishing electronic component manufacturing units, thereby bringing investments in the electronics manufacturing sector. This scheme was free to receive applications till 31 December 2018 for new projects as well as expansion projects and provided a subsidy for investments in capital expenditure for setting up electronics manufacturing facilities. What we saw was that M-SIPS had played an essential role in promoting investments in electronics manufacturing in India. 

Now, there is another program to boost investments in the electronic manufacturing sector. Known as Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) introduced in April 2020, the program is aimed to offer monetary stimulus of 25% of capital expenditure for the manufacturing of goods that form the supply chain of electronic goods.

The scheme will balance the disability for domestic manufacturing of components and semiconductors to grow the electronics manufacturing ecosystem in India. There are various classes of goods eligible for incentive under SPECS, ranging from a Minimum Investment Threshold Limit of INR 5 crore to Minimum Investment Threshold of INR 1000 crore, including semiconductor wafers and Semiconductor Integrated Chips (ICs). 

With the newly announced era of Internet of Things (IoT), directing that the new generation of interconnected devices be capable of smart-computing, the Indian semiconductor industry is set for a solid rise with fresh prospects provided India’s infrastructure and funding issues for electronics chip manufacturing are met.

At the moment, almost all the semiconductor demand is satisfied by imports from nations like the USA, Japan, and Taiwan. In the semiconductor area, India has a large human-capital pool, which is focused on the design side, not manufacturing. Hopefully, this may change in the coming years.

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