Highlighting concerns over the USD 24,000 cap under the Design Linked Incentive, Dr Veerappan V of the Indian Electronics and Semiconductor Association (IESA) discussed with EFY’s Nijhum Rudra how ISM 2.0 policies are set to drive foreign investments in India’s semiconductor industry.
Q. As a new chairman of IESA, what’s keeping you busy? What are your views on the upcoming ISM 2.0?
A. We are now deeply involved in the India Semiconductor Mission (ISM), which is exciting! ISM 1.0 has been a solid foundation for India’s semiconductor industry, and now ISM 2.0 is gearing up to take things to the next level. Numerous global companies are now eager to set up operations in India — including key players in the semiconductor supply chain like fab and OSAT (Outsourced Semiconductor Assembly and Test), as well as equipment suppliers and chemical and gas providers — is a positive indicator of the country’s growing position in this space.
Q. What specific feedback or recommendations are you focusing on for ISM 2.0? Are there any areas you’re particularly excited or concerned about as the program advances?
A. I believe ISM 2.0 should shift focus toward encouraging more domestic semiconductor design and the growth of India-manufactured integrated circuits (ICs). Moreover, strengthening the design segment can help India move from being a manufacturing hub to a key player in semiconductor innovation and development. The current Design Linked Incentive (DLI) scheme might need to be ramped up because more than USD $24000 might be needed to attract and support the scale of design talent and companies required to make India a true semiconductor powerhouse. Further, expanding the incentive pool could encourage more startups and established firms to set up chip design operations in India.
Q. Can you highlight and paint a detailed picture of India’s current growth in the ESDM and semiconductor industry? What is the market growth and scale?
A. The semiconductor consumption in India is currently valued at USD $30 billion and is expected to grow to USD $100 billion by 2030. This growth trajectory significantly boosts industries like consumer electronics, automotive (with electric vehicles and connected car technologies), telecommunications, and industrial automation. The Indian electronics market is already a significant USD $150 billion industry and is projected to reach USD $400 billion by 2030—a threefold increase. As part of IESA’s vision for 2047, the goal is to align India’s electronics and semiconductor industries with the country’s broader economic growth. India’s electronics sector is poised for significant growth, with projections indicating it could contribute as much to the economy by 2047 as the nation’s GDP today of USD $3.8 trillion. Currently, the electronics market in India is valued at USD $155 billion, with domestic production accounting for 65 percent of this value.
Q. Amid this optimistic scenario, what are the current challenges in the industry that require urgent solutions?
A. The primary concern is the high dependence on imports for passive electronic components, such as capacitors, resistors, and power components. About 99 percent of these components are imported, mainly from China. The government has a clear policy focus on semiconductor manufacturing, and with the current trajectory, the sector is expected to grow over the next 3-5 years. In addition to fabs, the country has announced developments in semiconductor assembly, testing, marking, and packaging. However, these efforts will take time to stabilise and reach their full potential.
There is a push for the government to focus on promoting local manufacturing of passive components in India. This includes providing incentives for production and encouraging the growth of a domestic supply chain for these critical components. India manufactures less than 1 percent of the world’s PCBs, which are crucial for assembling electronic devices. The Indian government is encouraged to focus more on PCB manufacturing to create a more complete electronics supply chain within the country. You need to understand that the growth of EMS in India has primarily focused on assembly with limited value addition. The push is for India to focus more on PCBs’ design, production, and innovation to increase the sector’s value.
Q. What are some of the key policy recommendations you have recently given to the central government? Which are the upcoming states to have a dedicated semiconductor policy?
A. We are actively involved with MeitY (Ministry of Electronics and Information Technology), particularly in policy recommendations like the PLI (Production Linked Incentive) scheme, and participation in forums like ISM (India Semiconductor Mission). We are part of the core committees responsible for policy recommendations, which help shape India’s electronics and semiconductor landscape. IESA is working with multiple states to implement semiconductor policies, which include Karnataka, Maharashtra, Uttar Pradesh, Madhya Pradesh, Assam, Telangana, and Tamil Nadu. CSDM (Chip Supply and Demand Management) policies have already been announced in some states. Three more states are expected to announce semiconductor policies soon, with IESA actively contributing to those developments.
Q. Will a separate incentive or PLI be announced for PCBs only? Would it create a budget burden on the government?
A. The government has allocated significant funds around USD $ 5 billion in incentives —for the semiconductor sector. Once demand and investor interest are clearer, the government might consider further steps or adjustments. You must note that the government is seriously considering the recommendations, and the industry is waiting to see how these policy adjustments unfold.
Q: What are your upcoming strategies and initiatives for developing the industry?
A. The government’s announcement of the FAB initiative is a critical step, but as you mentioned, these FABs require a solid and integrated ecosystem of suppliers and partners. A single FAB needs a broad supply chain involving multiple stakeholders, including chemical companies, gas suppliers, equipment providers, and other supporting industries.
IESA is working on building partnerships, primarily through international collaborations with countries like Singapore, Taiwan, and others that already have established semiconductor supply chains. The goal is to bring those ecosystem players to India to support the FABs and OSATs (Outsourced Semiconductor Assembly and Test Facilities). On the state side, there’s a push for developing infrastructure to support semiconductor manufacturing. States are offering financial incentives for building infrastructure, and IESA is working closely with the government to ensure these policies align with the semiconductor ecosystem’s needs. It includes recommendations on infrastructure investments that can help attract key partners and suppliers to India.
Q. Other than ESDM and semiconductors, what initiatives are you undertaking to bolster the IT parks in India?
A. STPI (Software Technology Parks of India) is now working on creating electronic parks in Delhi and Bhubaneswar, which could be a big step towards creating semiconductor-focused infrastructure across India. The SFAL (Semiconductor Fabless Accelerator Lab) program in Karnataka is a notable success, supporting more than 25-30 companies. It’s a valuable platform for semiconductor startups and fabless companies, helping them scale up their businesses. The fact that other states like Maharashtra and Tamil Nadu are now looking to replicate this model is an excellent sign for the industry.
Q. Speaking about your memberships, what are your pricing structures? Is the pricing same for global and Indian companies?
A. Our membership fee doesn’t differentiate between companies based on their country of origin (whether they are Indian or multinational). The fees are instead based on the size of the company and its category within the organisation. Larger companies, regardless of origin, pay higher fees. For example, the largest companies such as Intel pay 400,000 per year. There’s a special offer to encourage Indian startups, where they pay a significantly lower membership fee (around 30,000 to 35,000 per year).
Q. What are the initiatives you are undertaking to boost skills in India? Which are the institutions you have partnered with?
A. IESA’s Campus Connect initiative is a strong and effective effort to bridge the gap between academia and the semiconductor industry. With 72 colleges and top universities like the IITs, NITs, and other prestigious institutions already signed up, the initiative has strong participation from leading educational bodies. IESA conducts regular webinars for students and universities to keep them informed about the opportunities in the semiconductor industry. IESA has developed and provided a comprehensive VLSI curriculum to more than 20 universities. This curriculum supports master’s-level programs in VLSI, ensuring the academic programs align with industry requirements. Moreover, in collaboration with universities and industry partners, IESA is working on ‘finishing schools’ which helps students bridge the gap between theoretical knowledge and practical, industry-specific skills.
