Setting Up a Semiconductor Fabrication Plant in India: What Foreign Investors Should Know

Posted by Written by Melissa Cyrill and Yashoda Kapur Reading Time: 11 minutes

Latest updates:

  • The Indian government confirmed it has received proposals from five companies to establish electronic chip and display manufacturing plants with an investment of INR 1.53 trillion (approx. US$20.5 billion). Given the time-intensive decision-making process and international travel disruptions due to COVID-19, there is currently no firm deadline in place for companies submitting their applications to India’s semiconductor chip design and manufacturing scheme: Rajeev Chandrasekhar, minister of state for electronics and IT, speaking to The Economic Times. Initially, the first window for applications was until February 15.
  • The Ministry of Electronics and Information (MeitY) is seeking applications from 100 domestic companies, start-ups and MSMEs under its Design Linked Incentive (DLI) Scheme. The scheme has three components – Chip Design infrastructure support, Product Design Linked Incentive and Deployment Linked Incentive. C-DAC (Centre for Development of Advanced Computing), a scientific society operating under MeitY, will serve as the nodal agency for implementation of the DLI scheme. The DLI scheme aims to nurture at least 20 domestic companies involved in semiconductor design and facilitate them to achieve turnover of more than INR 15 billion in the next five years. A dedicated portal has been made available – www.chips-dli.gov.in – for inviting online applications from January 1, 2022 to December 31, 2024. The applicants can find the guidelines of the DLI Scheme on the portal and register themselves for availing support under the scheme.
  • The IT ministry has released guidelines for implementation of the scheme and a semiconductor portal is being prepared for accepting and processing applications from interested companies. See here for government notified PDF links and application guidelines.
  • India announced on December 30, 2021 that the government will start receiving proposals from companies for semiconductor and display manufacturing from January 1, 2022. Guidelines for the schemes have been notified. See here for information on the application process and fiscal support available: Semiconductor Companies Can Submit Proposals to Indian Govt. from January 1, 2022
  • To learn more about the Indian government’s fresh incentives and ambitious support agenda for semiconductors, read our article: What Can Chip Companies Expect from India’s New Semiconductor Incentives Package?
  • In order to drive long-term strategies for developing a sustainable semiconductors and display ecosystem, a specialized and independent “India Semiconductor Mission (ISM)” will be set up by the government. The India Semiconductor Mission will be led by global experts in semiconductor and display industry and act as the nodal agency for efficient and smooth implementation of the schemes on Semiconductors and Display ecosystem.
  • On December 15, 2021, the Indian government cleared a INR 760 billion (>US$10 billion) package to boost semiconductor and display manufacturing. The program aims to provide attractive incentive support to companies / consortia that are engaged in Silicon semiconductor fabs, display fabs, compound semiconductors / silicon photonics / sensors (including MEMS) fabs, semiconductor packaging (ATMP / OSAT), semiconductor design. Incentives worth INR 2.3 trillion (approx. US$30.16 billion)will be available to position India as global hub for electronics manufacturing.
  • Over 20 semiconductor manufacturing and designing companies in high-end, display, and specialty fabrication have reportedly submitted Expressions of Interest (EOIs) to set up manufacturing plants in India. The deadline was April 30, 2021.
  • The government is open to introducing new incentives for chipmakers, beyond those detailed in the PLI scheme. It will likely be based on the investment coming in and the company’s area of work, type of fab, and requirement. No further information has been put out yet.
  • The demand for semiconductors in India is valued at over US$10 billion.
  • India Briefing spotlights the latest developments in India’s nascent semiconductor industry, where the talent pool has focused, and recent government initiatives to boost investment growth.

India’s semiconductor industry profile 

Semiconductors or chipsets are used in all modern electronic devices and technologies, with a range of applications that range from electronic products and IT hardware to defense technology, industrial electronics, medical electronics, automation (workplace, healthcare, manufacturing etc.), and the Internet of Things (IoT).

Moreover, rapid developments in the capacity for intelligent computing and growth of AI in these applications and related industries has further expanded the dependency on semiconductor research and escalated the economic value of its manufacturing capacity.

According to the India Electronics and Semiconductor Association (IESA), semiconductor consumption in India was worth US$21 billion in 2019, growing at the rate of 15.1 percent. Research and development in this industry, which includes electronic products and embedded systems, generated about US$2.5 billion in revenue.

Yet, India lags in the establishment of semiconductor wafer fabrication (FAB) units – due to a weak ecosystem and shortage of resources as compared to more competitive bases like China and Vietnam.

Semiconductor FAB units require huge investments, gallons of water for production, uninterrupted electricity supply, high operating costs, and the need for frequent technology replacement.

This is why India’s contribution to the industry has focused on its technical competencies in R&D, design, etc. due to its talent pool in IT design and R&D engineers. The Indian semiconductor design market was projected to grow by a CAGR of 29.4 percent from US$14.5 billion in 2015 to US$52.6 billion in 2020.

As per the Ministry of Electronics and Information Technology (MeitY), R&D capabilities in very large-scale integration (VLSI) and chip design are showcased by the Centre of Excellence in Nanoelectronics at Indian Institute of Science, Bangalore and the Indian Institute of Technology, Bombay. India is setting up commercial semiconductor wafer fab units and two consortia have initiated work in this regard. The proposed location is Greater Noida in Uttar Pradesh (about 40 kms from New Delhi) and in Prantij in Gujarat (about 50 kms) from Gandhinagar.

In order to overcome the capital intensive hurdles, the Indian government is actively seeking foreign capital to set up semiconductor manufacturing facilities in the country.

In early 2021, the Indian government sought proposals from interested applicants to either setup (and/or expand) semiconductor wafer/device fabrication plants (FABs) in India or their acquisition outside India. The notification about the Expression of Interest was available in Korean, Japanese, Hebrew, and Chinese – an indication of the expected investment interest from foreign players. The deadline for these proposals (Expression of Interest) was extended from March 31, 2021 to April 30, 2021.

In December 2021, the Indian government unveiled the Program for Development of Semiconductors and Display Manufacturing Ecosystem in India, with an outlay of INR 760 billion (>US$10 billion) for the development of a sustainable semiconductor and display manufacturing ecosystem in India. The IT ministry has released guidelines for implementation of the scheme and a semiconductor portal is being prepared for accepting and processing applications from interested companies. See table below for government notified PDF links.

New semiconductor schemes in India

Semiconductor scheme in India

Government notification

Application form and submission guidelines

Scheme for setting up of Semiconductor Fabs in India

Link to PDF: Gazette Notification on Tuesday, December 21, 2021.

Link to PDF: Released December 30, 2021

Scheme for setting up of Display Fabs in India

Link to PDF: Gazette Notification on Tuesday, December 21, 2021.

Link to PDF: Released December 30, 2021

Scheme for setting up of Compound Semiconductors / Silicon Photonics / Sensors Fab and Semiconductor Assembly, Testing, Marking and Packaging (ATMP) / OSAT facilities in India

Link to PDF: Gazette Notification on Tuesday, December 21, 2021.

Link to PDF: Released December 30, 2021

Design Linked Incentive (DLI) Scheme

3 components:

  • Chip Design Infrastructure Support
  • Product Design Linked Incentive
  • Deployment Linked Incentive

Link to PDF: Gazette Notification on Tuesday, December 21, 2021.

Link to PDF: Gazette Notification on Thursday, December 30, 2021.

Link to Press Release dated January 16, 2022: Applications invited under the Design Linked Incentive (DLI) Scheme from domestic semiconductor chip design firms

A dedicated portal has been made available – www.chips-dli.gov.in – for inviting online applications from January 1, 2022 to December 31, 2024. The applicants can find the guidelines of the DLI Scheme on the portal and register themselves for availing support under the scheme.

Investment trends in the industry

Between April 2000 and December 2020, India’s electronics sector received FDI worth US$3 billion, and the Indian government has allowed 100 percent FDI under the automatic route for the electronics sector. According to the Indian government, India’s semiconductor market was worth US$15 billion in 2020 and projected to reach US$63 billion by 2026 and India’s display panel market is estimated to be worth around US$7 billion and expected to grow to US$15 billion by 2025.

The following lists notable developments in the semiconductor industry:

  • In a statement released to the media by the government on February 19, 2022:
    i) Vedanta Foxconn JV, IGSS Ventures and ISMC have proposed to set up electronic chip manufacturing plants with US$13.6 billion investment. They seek US$5.6 billion in support from the central government under the Semicon India Program to set up 28 nm to 65nm semiconductor fabs with capacity of approx. 120,000 wafers per month.
    ii) Vedanta and Elest have submitted applications to set up display fab projects with an investment of US$6.7 billion and seek support worth around US$2.7 billion. The latter have submitted proposals to set up Gen 8.6 TFT LCD Display Fab as well as 6th Generation Display FAB for the manufacture of State-of-art AMOLED display panels that are used in the advanced smartphones.
    iii) SPEL Semiconductor Ltd., HCL, Syrma Technology, and Valenkani Electronics have registered under the Scheme for Semiconductor Packaging and Ruttonsha International Rectifier Ltd. has registered under the Scheme for Compound Semiconductors.
    iv) Terminus Circuits, Trispace Technologies, and Curie Microelectronics have submitted applications under the Design Linked Incentive Scheme. The applicant companies have also submitted the proposals for technology acquisition, partnerships, and collaborations with research institutes as part of the applications.
    v) Last year the government announced it was seeking to commercialize the ISRO-owned Semiconductor Lab (SCL) at Mohali. SCL Mohali has now been handed over to MeitY from Department of Space and will be opened up as a commercial fab for wider participation by Indian semiconductor design companies. 
  • In late 2021, US chipmaker giant Intel expressed its interest in setting up a new plant in India and is likely to apply for incentives under the new scheme under the Program for Development of Semiconductors and Display Manufacturing Ecosystem in India.
  • India and Taiwan are currently negotiating a free trade deal, with Taiwan setting up a semiconductor manufacturing unit in India serving as a key component for expanding bilateral economic engagement. The Indian government has reportedly already proposed a number of sites for the facility. Taiwan’s leading semiconductor producers are the Taiwan Semiconductor Manufacturing Company (TSMC) and the United Microelectronics Corporation (UMC). TSMC manufactures around 50 percent of all semiconductors globally as per industry estimates.
  • Business Standard reports that “Tata Group is in discussions with some major international companies, including those from Taiwan, for its foray into the semiconductor chip business.” 
  • The Japan-based electronics company, Panasonic Corporation, has plans to set up a new plant at Jhajjar in Haryana for the production of refrigerators targeting the Indian market. Panasonic also intend to set up an R&D center for appliances, consisting of two technical divisions, to strengthen its product development in India.
  • Samsung India Electronics Ltd will set up its new corporate office in the Goregaon suburb of Mumbai; the company has signed a deal to lease 100,000 square feet of space at Oberoi Realty Ltd’s commercial property Commerz II.
  • Growth stage investor Next Orbit Ventures has planned to invest US$100 million in a semiconductor fabrication project based in Gujarat.
  • Californian product engineering company INVECAS has planned to invest between US$15-20 million for the setup of design centers in Bengaluru and Hyderabad over the next few years.
  • German semiconductor firm Infineon Technologies has partnered with the non-profit National Skill Development Corporation (NSDC) to impart education and training regarding semiconductors to young talents for the purpose of developing India’s electronics manufacturing ecosystem.
  • US semiconductor company Freescale merged into ‘NXP Semiconductors’ in 2015.
  • US engineering firm Aricent acquired Bengaluru’s chip design services company SmartPlay for US$163 million, making this the largest acquisition of semiconductors in India.
  • For the development of trade and technical cooperation in the semiconductor industries between India and Singapore, IESA and the Singapore Semiconductor Industry Association (SSIA) have signed a memorandum of understanding (MoU).

Initiatives of the government

Notable initiatives undertaken by the Indian government for the development of the semiconductor industry include:

  • On December 30, 2021, the Indian government announced it will start receiving proposals from companies for semiconductor and display manufacturing from January 1, 2022. To learn more about the incentives on offer and eligibility criteria, see our article here.
  • On December 15, 2021, the Program for Development of Semiconductors and Display Manufacturing Ecosystem in India was announced, with an outlay of INR 760 billion (>US$10 billion) for the development of a sustainable semiconductor and display manufacturing ecosystem in India. This funding of US$10 billion will be provided over a period of six years and is expected to bring in investments of up to INR 1700 billion (US$22.5 billion). Overall, the program will provide attractive incentives and support companies engaged in the manufacturing of silicon semiconductor fabs, display fabs, compound semiconductors/silicon photonics/sensors (including MEMS) fabs, semiconductor packaging (ATMP/OSAT), and semiconductor design. Among other objectives, India wants to set up at least two greenfield semiconductor fabs and two display fabs.
  • To ensure a boost in the semiconductor industry, the Union Budget of 2017-18 increased the allocation for incentive schemes, such as the Modified Special Incentive Package Scheme (M-SIPS) and the Electronic Department Fund (EDF), to US$111 million.
  • To ensure further investments in the industry, create employment opportunities, and reduce dependence on imports by 2020, the government amended the M-SIPS by approving new incentives for investors, worth US$1.47 billion.
  • The MeitY has planned to revise its policy framework, to develop the industry by providing initial capital that is meant to attract more private players and push India to become a global hub for semiconductors.
  • The government of Telangana has planned to launch T works, India’s largest prototyping center, in Hyderabad for the purpose of acting as a prototyping center for semiconductors.
  • The government of Gujarat has planned to set up a new electronics manufacturing hub in the state, following the launch of its electronics policy in 2016, and is expected to generate around 500,000 jobs in the electronics sector in the next five years.
  • The federal government has set up an empowered committee for manufacturing in high technology areas, which will be headed by the minister of Commerce and Industry, and notable people from the Indian industry, including Tata Sons chairman N Chandrasekaran, Bharat Forge Chairman Baba Kalyani, Mahindra Group managing director and CEO Pawan Goenka, Zoho Corp CEO Sidhar Vembu, and semiconductor expert Anshuman Tripathi.
  • In 2016, an electropreneur park was inaugurated at the University of Delhi’s (DU) South Campus to incubate 50 early stage start-ups and lead to the creation of at least five global companies over a period of five years.
  • The government has approved a Scheme for the Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and a Production Linked Incentive (PLI) scheme for 13 critical sectors like telecom, automobiles, etc.

Archived: Setting up a semiconductor fabrication plant in India and submitting an Expression of Interest

Besides aiding intelligent computing systems, semiconductors also play an important role in the advancement of emerging technologies, such as IoT, 5G, robotics, and autonomous vehicles. However, these technologies will not be able to advance further unless India is able to develop a sustainable semiconductor manufacturing ecosystem – a prerequisite to advance India’s online infrastructure.

As per the India Cellular and Electronics Association (ICEA), India’s semiconductor industry is capable of gaining a sizeable share of the global market by becoming a hub for laptops and tablets, which will provide a manufacturing value of US$100 billion and create 500,000 jobs.

To ensure targeted interest from foreign players, the government has invited leading international players to submit their proposals to the MeitY by March 31, 2021, if interested.

The EoI is to be submitted within stipulated timeline at the following address:

Shri Saurabh Gaur

Joint Secretary

Ministry of Electronics and Information Technology (MeitY)

Room No. 4016, Electronics Niketan

6, CGO Complex, Lodi Road, New Delhi – 110003

Tel: +91-11-24301210; +91-11-24363071

Email: fab[dot]eoi-dit[at]meity[dot]gov[dot]in

What are the types of projects encouraged?

The following types of projects have been encouraged by the government when seeking investment proposals:

Category A: Well established Integrated Device Manufacturers (IDMs)/Foundries/Indian Company or Consortia with Indian Industry Partner

  1. Having state-of-the-art mainstream complementary metal-oxide-semiconductor (CMOS) technology nodes for fabricating processors, memories, analog/digital/mixed signal integrated circuits
  2. Desirous of setting up/expanding existing semiconductor FABs in India (preferably with a node size of 28mn or lower, wafer size of 300mn and a capacity of 30,000 WSPM or more)

Category B: Well established Integrated Device Manufacturers (IDMs)/Foundries/Indian Company or Consortia with Indian Industry Partner

  1. Having state-of-the-art compound semiconductor-based emerging technologies for fabricating high frequency/high power/optoelectronics devices
  2. Desirous of setting up/expanding existing semiconductor FABs in India (preferably a wafer size of 200mn or more)

Category C: Indian Companies/Consortia interested in the acquisition of semiconductor FABs outside India

Submission of EoI proposal

The EoI proposal may be submitted in the form of a Preliminary Project Report (PPR) detailing the following:

• Category A/B/C for which the EoI is being submitted.
• Proposed location(s).
• Land, water, and power requirement.
• Technology specifications including proposed process technology(ies), node(s), wafer size(s), products (process wafers/ICs post ATMP/OSAT), provision to manufacture compound semiconductor devices, technology availability/proposed tie-ups for acquiring technology.
• Operational details including the proposed capacity in terms of wafer starts per month (WSPM), ramp-up timeline, and management structure.
• Financial details including proposed investment, sources of funding and ownership structure; projected P&L statement, and key financial indicators (IRR, ROI, ROCE, EBIDTA, and NPV with and without expected government support).
• Financial support desires from the government of India, including grant-in-aid (GIA), viability gap funding (VGF) in the form of equity and/or long-term interest free loan (LIFL), tax incentives, infrastructure support etc.
• Support desired from the state government in terms of extent, value, and nature of land; availability and cost of provisioning water; and power tariff.
• Human resources such as requirement of trained manpower and feasibility/potential modalities/support for development of talent leveraging Indian universities.
• Capital goods such as the requirement of new/refurbished capita goods (plant, machinery utilities, transfer of technology, etc.).
• Raw material, details regarding sourcing of raw materials, e.g., specialty gases and ultra-pure chemicals of semiconductor grade; road map for developing the raw material manufacturing ecosystem in India.
• R&D support, desired support for R&D and proposed mechanisms; possible Indian R&D counterpart or prospective agencies/organizations for research (if any).
• Market feasibility, availability of market for FAB output, proposal for keeping the fab loaded to work at optimum capacity to serve the market.
• Relocation, in case of category C, indicate any plan to transfer the FAB to India.

This article was originally published on April 6, 2021. It was last updated December 31, 2021.


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India Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Delhi and Mumbai. Readers may write to india@dezshira.com for more support on doing business in in India.

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