Budget 2024: Semiconductor industry gets big boost

The domestic semiconductor industry has received a mega boost in the interim budget of 2024-25, presented by the union finance minister Nirmala Sitharaman on February 1. As per the budget estimates, the capital outlay under the modified programme for the development of semiconductors and display manufacturing ecosystem in India has been increased by a whopping 130.1% to ₹6,903 crore in FY25, as against ₹3,000 crore announced in last year’s budget.

The government, however, has halved the revised capital outlay under the semiconductor manufacturing programme for FY24 to ₹1,503 crore.

Under the programme, the government provides 50% fiscal support of project cost for all technology nodes for setting up of semiconductor and display fabs in India. Moreover, the scheme also provides 50% fiscal support of capital expenditure for setting up of compound semiconductors, silicon photonics, sensors fab and semiconductor ATMP/OSAT facilities in India.

The development finds significance as the domestic semiconductor component industry has been seeking incentive support for localisation. At present, Taiwan, China and South Korea are among the key markets for semiconductor imports. As per government data, the semiconductor component imports have gone up from ₹67,497 crore to nearly ₹1.3 lakh crore in FY23. Semiconductor is a key component in the manufacturing of electronics and electric vehicles.

Notably, in order to boost local production of semiconductors, the government launched the Semicon India Programme in December 2021, with a capital outlay of ₹76,000 crore. he government had then said, "The setting up of 'India Semiconductor Mission' will drive this sector. Incentives of ₹2.3 lakh crore will be given." In May last year, the government invited fresh applications under the programme, 15 months after the first closing round of the Semicon India Programme.

Last year, Prime Minister Narendra Modi invited several global semiconductor manufacturing companies to invest in India. Micron Technology, one of the world’s largest semiconductor companies, had committed an investment of up to $825 million to build a new assembly and test facility in Gujarat. Last month, Tata Group announced building a semiconductor manufacturing facility in Gujarat’s Dholera district.

According to a report by Counterpoint Research, the country’s semiconductor component market is expected to grow at a CAGR of 19% from 2021 to 2026.