New Delhi: In good news for Indian entrepreneurs, startups, and small and medium companies, the Union government on Sunday invited applications for starting the chip designing and manufacturing process under its recently announced $10 billion Design Linked Incentive Scheme (DLI), said a statement.
In the first stage, 100 Indian semiconductor and chip design firms will be selected for the incentives under the scheme.
In December, the Information and Technology Minister Ashwini Vaishnaw had announced financial incentives and design infrastructure support worth $10 billion (Rs 76,000 crore) for development and deployment of semiconductor design for Integrated Circuits (ICs), Chipsets, System on Chips (SoCs), Systems and IP Cores and semiconductor linked to design. The scheme will be implemented over a period of 5 years.
The DLI scheme, which has been modeled on other Production Linked Scheme (PLI) to boost domestic manufacturing, aims to nurture at least 20 domestic companies involved in semiconductor design and help them to achieve a turnover of more than Rs 1500 crore in the next 5 years.
Acute shortage of semiconductor chips
The outbreak of the Covid-19 global pandemic affected the global supply chains that were already under pressure due to a trade war between the world’s two largest economies – the US and China.
The problem was further aggravated as the plants of two Japanese chip makers caught fire and affected the global supply of microprocessor chips.
According to some estimates, nearly 170 industries, including the automobile sector have been affected due to a shortage of semiconductor chips which also led to the suspension of manufacturing by several Indian companies such as Mahindra Group and Maruti Suzuki.
Prime Minister Narendra Modi’s government that launched an ambitious self-reliant India (Atma Nirbhar Bharat) scheme in the wake of the outbreak of Covid-19 global pandemic in early 2020 to make the country self-reliant in critical sectors of the economy by boosting local manufacturing, in December launched a design linked incentive scheme to make India a hub for manufacturing of semiconductor chips.
Three-pronged strategy
C-DAC (Centre for Development of Advanced Computing), a scientific society operating under the MeitY, will serve as the nodal agency for the implementation of the DLI scheme.
Officials said the scheme has three components – chip design infrastructure support, product design linked incentive, and deployment linked incentive.
Under the Chip Design infrastructure support, C-DAC will set up the India Chip Centre to host the state-of-the-art design infrastructure which will include EDA Tools, IP Cores, and support for MPW (Multi Project Wafer fabrication) and post-silicon validation and help the companies to access this facility.
Officials said, under the Product Design Linked Incentive component, a reimbursement of up to 50% of the eligible expenditure subject to a ceiling of Rs 15 crore per application will be provided as financial support to the approved applicants who are engaged in semiconductor design.
Under the Deployment Linked Incentive component, an incentive of 6% to 4% of net sales turnover over 5 years will be provided. However, a maximum incentive of Rs 30 crore can be availed under this component. It will be given to those companies whose semiconductor design for Integrated Circuits (ICs), Chipsets, System on Chips (SoCs), Systems and IP Cores, and semiconductor linked design are deployed in electronic products.
Firms to retaindomestic status
One of the important features of the DLI scheme is that the successful applicants that claim incentives under the scheme will have to retain their domestic status.
It means that more than 50% of the capital in that company should be beneficially owned by resident Indian citizens or Indian companies, which are ultimately owned and controlled by resident Indian citizens for a period of three years after claiming incentives under the scheme.
Moreover, successful applicants must meet the threshold and ceiling limits to be eligible for disbursement of incentives under the scheme.
How to Apply
The government has set up a dedicated portal www.chips-dli.gov.in for inviting online applications. Applications can be made from January this year to the end of December 2024.
Any Indian company or startup seeking to start the work on designing and manufacturing semiconductor chips in the country can visit the portal for the guidelines and also register on it to avail of the incentives.
The DLI Scheme will also take a graded and pre-emptive approach for identifying the products of national priorities and implement strategies for their complete or near-complete indigenization and deployment.
