Will Upcoming Budget Deliver on India’s Semiconductor Needs?
As India positions itself as a global hub for semiconductor manufacturing, all eyes are on the Union Budget 2025. Discussions across all industries in India have intensified, with the semiconductor sector being no exception. Following significant allocations to key technology missions in the previous Budget, the semiconductor industry anticipates its moment in the spotlight this year. Over the past year, India’s ambition to be a global semiconductor hub has gained momentum, particularly with the government’s Production Linked Incentive (PLI) schemes and investments in R&D. These efforts aim to reduce reliance on imports and foster a robust domestic semiconductor ecosystem, aligning with global supply chain resilience trends. Many industry leaders have voiced their expectations, focusing on incentives for setting up fabs, expanding talent pools, and addressing critical gaps in semiconductor manufacturing infrastructure. The sector is also looking forward to measures that will ensure strategic partnerships with international players, enable indigenous chip design innovation, and provide tax breaks to stimulate private investment. As the government unveils its vision in the upcoming Budget, the semiconductor industry could play a defining role in advancing India’s goals of self-reliance and economic growth. Semiconductors in Last Year’s Budget The Union Budget 2024 introduced pivotal measures for the semiconductor sector. To develop the semiconductor and display manufacturing ecosystem, a significant allocation of INR 6,903 crore – more than double the previous year’s allocation of INR 3,000 crore – was announced. Key provisions included 50% fiscal support for setting up semiconductor and display fabs, as well as support for compound semiconductors, silicon photonics, sensors fabs, and ATMP (assembly, testing, marking, and packing) and OSAT (outsourced semiconductor assembly and test) facilities. These measures aimed to strengthen India’s semiconductor supply chain and reduce reliance on imports. On the contrary, there have been previous conversations about the Budget bar being too low. In an interview with AIM last year, V Ramgopal Rao, group vice-chancellor of BITS Pilani Campuses, said, “The next government looks at the last Budget and actual utilisation and adds some 5% to that, but the base is already very low.” Additionally, due to geopolitical shifts and US sanctions, India must urgently secure strategic autonomy by developing its own semiconductor IP and products. Ajai Chowdhry, co-founder of HCL and chairman of the National Quantum Mission, emphasised that by designing indigenous chips, the country can safeguard against future global trade restrictions and technological sanctions. With most chips still imported, the government must prioritise Indian-made high-quality chips for the nation. “We suggested the government provide a list of 30 chips and 30 priority products that should be developed and manufactured in India.” The EPIC Foundation has proposed an INR 44,000 crore allocation in the Budget, with INR 15,000 crore earmarked for system products and INR 11,000 crore for semiconductor products. Moreover, the central and state governments have allocated INR 90,000 crore for capital expenditure. This highlights India’s growing commitment to semiconductor self-sufficiency. “We are already establishing five semiconductor plants across the nation, with more planned. It is our request to the government, ministry, as well as the finance minister to look at the proposal very critically as this has become much more urgent and important due to the new regulations coming in from the US,” Chowdhry stated. Key Recommendations From IESA This Year As India continues its semiconductor and manufacturing journey, industry leaders like the India Electronics and Semiconductor Association (IESA) have shared crucial recommendations for the Union Budget 2025-26. Ashok Chandak, president of IESA, highlighted the importance of expanding existing initiatives and introducing targeted measures to ensure long-term sustainability and competitiveness. “The Semicon India Program and ISM have delivered significant contributions to GDP growth, job creation, foreign investments, industrial self-reliance, and bolstering India’s position in the global semiconductor market,” Chandak emphasised. The IESA’s proposal includes extending the PLI scheme with an additional $20 billion over five years, supplementing the existing INR 76,000 crore. This would support the growth and innovations of industry projects and Aatmanirbhar Bharat Abhiyan along with the Viksit Bharat 2047 initiative. Chandak has proposed a stricter PLI framework is recommended, ensuring 25% local value addition by 2025-26 and 30% by 2027. Moreover, $5 billion in incentives is proposed for the electronics components industry. To foster innovation, IESA advocates allocating INR 10,000 crore for industry-driven R&D through a PPP model. Role of Data Infrastructure As India accelerates its digital transformation across sectors like finance, retail, and education, the demand for advanced and scalable data infrastructure continues to grow. Sunil Gupta, co-founder and CEO of Yotta Data Services, underscores the critical role of data centres and AI technologies in supporting this evolution, particularly with initiatives like Digital India and the IndiaAI Mission gaining momentum. “Investments in sovereign infrastructure, including data centres and AI-driven technologies, will not only bolster the nation’s tech status but also attract substantial private-sector investment,” Gupta stated to AIM. He further highlighted the importance of the Union Budget prioritising measures such as advancements in GPU and semiconductor technologies. This focus, Gupta believes, will propel growth in data centres and AI industries and position India as a leader in the global digital economy. Shrirang Deshpande, strategic program head at Vertiv India, said, “We anticipate measures supporting the rise of data centres as the Union Budget draws near, such as incentives for integrating green energy, simplified regulations for expanding infrastructure as well as initiatives to improve connectivity in Tier-2 and Tier-3 cities and generating employment opportunities.” While also highlighting this, Chris Miller, the author of Chip War, identified talent and infrastructure as two key challenges in India’s path to progress in the chip space. As countries like the US and China forge ahead with advanced 3–5 nm chip production, India grapples with foundational challenges. According to Miller, the time needed to develop infrastructure is a key challenge, particularly for specialised materials, chemicals, and tools essential to semiconductor manufacturing. However, experts warn that funding alone won’t resolve long-standing technological and infrastructural gaps. While optimistic about progress, Miller also cautioned that achieving full-scale capacity could take a decade, though efforts to build the necessary infrastructure are already underway.
INR 6,903 crore was announced for the semiconductor sector in the Union Budget 2024.
INR 6,903 crore was announced for the semiconductor sector in the Union Budget 2024.
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An information designer who loves to learn about and try new developments in the field of tech and AI. She likes to spend her spare time reading and exploring absurdism in literature.