The geopolitical advantage for India of companies and countries looking for resilient semiconductor and electronics supply chains is only going to last for “four or five years,” and that it was important to seize that opportunity within this period, Secretary of Electronics and Information Technology S. Krishnan said on Monday.
A decade ago, he recalled, Intel backed out of a semiconductor packaging and testing facility in India due to a $100 million grant from the government falling through. Circumstances have changed for the industry now, with production-linked incentives and direct subsidies, Mr. Krishnan said, speaking to industry executives at an event focused on bringing more electronics manufacturing to India.
35–40% target
The electronics supply chain could not be entirely localised in one country due to the ease of transporting components, Mr. Krishnan conceded and said that India should aim to capture a significant portion of electronics manufacturing in coming years. He stressed on the importance of manufacturing components in India. “Auto components in India is one such [success] story,” he said, “where starting from components we built up to automobiles, so a similar story is perfectly possible in electronics.”
Mr. Krishnan characterised government subsidies for semiconductor-related assembly and manufacturing facilities as “generous,” saying that a bulk of the setup costs were borne by the government. “Today, with about 50% [financial] support from the government of India and about 20% subsidy support from the State governments, almost 70% of the cost of the project is really funded by government as a subsidy,” he said, adding that much of these funds were disbursed pari passu, that is, before production had got under way.
Assembly, IP
Mr. Krishnan pushed back on arguments against focusing on assembly, where sophisticated components are produced elsewhere and brought together in a manufacturing facility. Assembled handsets account for the bulk of domestically made smartphones. “Lots of my colleagues in government tend to feel that value addition [with assembly] is limited, when there’s only 15 to 20% in India,” he said.
“My immediate reply to that is, just look at the employment. Look at the number of people who have found jobs as a result of this. India is an interesting country. We have some of the most high tech talent, but we also have a large population which needs jobs.”
He also said that the intellectual property surrounding hardware would have to be claimed in India. “There are at least 20,000 chip designers who work out of Bengaluru,” Mr. Krishnan said, referring to semiconductor architects. Pointing out that even an iPhone sold at $1,000 had a bill of materials not exceeding $250, he said that asserting rights to underlying software in hardware projects was important for Indian firms getting into the semiconductor space. “That is the next bet they have to take,” he said.
