Introduction:
In an unexpected and bold move, the Indian government has allocated Rs 6,900 crore for semiconductor projects in its latest budget.
Alongside this significant investment, the budget also introduces major duty cuts on electronic components. These initiatives aim to boost local manufacturing, enhance the semiconductor ecosystem, and reduce dependency on imports, positioning India as a rising powerhouse in the global tech industry.
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Major Investments in Semiconductor Projects
The budget has earmarked ₹4,203 crore for the modified scheme targeting the establishment of compound, discrete semiconductor manufacturing, and assembly units. This scheme is expected to attract investment in state-of-the-art semiconductor manufacturing technologies, boosting domestic production capacity.
Additionally, ₹1,500 crore has been allocated for setting up electronic chip plants, while ₹100 crore will support the development of electronic displays. The modernization of the Semi-Conductor Laboratory in Mohali has also been prioritized, with a dedicated fund of ₹900 crore.t.
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Tariff Reforms and Tax Reductions
To encourage local manufacturing, the government has proposed several amendments to the Customs Tariff Act, 1975. These changes include creating new tariff lines for products used in Indian semiconductor machines, e-bicycles, and printer cartridges, effective from October 1, 2024. Moreover, Finance Minister Nirmala Sitharaman announced the removal of Basic Customs Duty (BCD) on oxygen-free copper for resistor manufacturing and certain parts used in connectors.
The finance minister also highlighted exemptions for 25 critical minerals, including lithium, copper, cobalt, and rare earth elements, essential for sectors like nuclear energy, renewable energy, space, defence, telecommunications, and high-tech electronics. These exemptions aim to lower the cost of raw materials, thereby making Indian manufacturing more competitive.
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Industry Reactions and Expectations
Hitesh Garg, VP and India Managing Director of NXP Semiconductors, praised the budget’s focus on the semiconductor industry, noting a 52% increase in allocation for 2024-25.
He believes these measures align with India’s ambitions to become a global leader in electronics manufacturing.
Pankaj Mohindroo, Chairman of the India Cellular & Electronics Association (ICEA), welcomed the tariff concessions on critical materials used in the semiconductor ecosystem.
He highlighted the reduction of tariffs on Silicon Quartz and Silicon Dioxide from 5-7.5% to 2.5%, which is expected to boost silicon and power semiconductor wafer production in India.
Rajoo Goel, Secretary General of the Electronics Industries Association of India (ELCINA), emphasized the positive impact of reduced customs duties and exemptions.
However, he stressed the need for a comprehensive scheme to promote the manufacturing of electronic components, parts, and modules to reduce dependency on overseas suppliers.
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Boosting Employment and Skill Development
The budget also includes provisions for employment-linked incentive schemes to boost job creation in the manufacturing sector.
A. Gururaj, Managing Director of Optiemus Electronics, underscored the importance of skilling initiatives and incentives for first-time employees.
These measures are expected to support industries reliant on a skilled workforce, particularly in electronics manufacturing.
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Difference from Previous Allocations:
The Union Budget 2024-25’s allocation for semiconductor projects marks a significant increase and a more focused approach compared to previous years. Here are some key differences:
1. Increased Financial Commitment
- Higher Allocation: The current allocation of ₹6,903 crore represents a substantial increase compared to previous years, reflecting the government’s heightened focus on the semiconductor industry. The previous allocations were generally lower and less targeted towards specific sub-segments within the semiconductor ecosystem.
2. Broader Scope and Specific Targets
- Dedicated Funds for Specific Projects: Unlike earlier allocations, which were often more general, the 2024-25 budget specifies ₹4,203 crore for compound and discrete semiconductor manufacturing and assembly units. Additionally, ₹1,500 crore is earmarked for electronic chip plants, ₹100 crore for electronic displays, and ₹900 crore for the modernization of the Semi-Conductor Laboratory in Mohali. This detailed breakdown indicates a strategic approach to developing specific areas within the semiconductor sector.
3. Inclusion of Key Infrastructure Upgrades
- Modernization Efforts: The allocation for the modernization of the Semi-Conductor Laboratory in Mohali is a new focus, emphasizing not just the establishment of new facilities but also the upgrading of existing infrastructure. This is part of a broader push to enhance India’s research and development capabilities in semiconductors.
4. Enhanced Policy Measures
- Customs Tariff Reforms: The budget introduces amendments to the Customs Tariff Act, 1975, creating new tariff lines for semiconductor manufacturing products. It also reduces or removes customs duties on critical raw materials, such as oxygen-free copper and various rare earth elements. These measures are more extensive than those in previous budgets.
5. Focus on Comprehensive Ecosystem Development
- Broader Ecosystem Support: The current allocation is part of a wider strategy to develop a comprehensive electronics manufacturing ecosystem, including incentives for components, modules, and critical minerals. Previous efforts often focused more narrowly on specific segments or were less integrated into a broader industrial strategy.
6. Employment and Skill Development Initiatives
- Linked Incentives for Employment: The 2024-25 budget includes initiatives to incentivize employment and skill development. This is particularly important for first-time employees in the electronics manufacturing sector.
7. Alignment with Global Competitiveness Goals
- Global Positioning: The significant increase in funding and strategic focus aligns with India’s ambitions to become a global hub for electronics and semiconductor manufacturing. This represents a shift towards positioning India more prominently on the global stage, supported by increased financial and policy support.
Conclusion
The Indian government’s budget for 2024-25 marks a significant step towards strengthening the country’s semiconductor and electronics manufacturing industries. projects.
Industry leaders have welcomed these initiatives, highlighting their potential to accelerate growth and enhance India’s competitiveness on the global stage.
