Semiconductor Industry Hub: Gujarat's New Policy Attracts Global Groups
Electronics is amongst the most intensive global value chain sector in the world, and its global value chains are largely concentrated among a few countries in Asia. The semiconductor industry, which is valued at more than USD 400 billion globally, is the most rapidly growing electronics sector.
Semiconductors are the cornerstone of modern electronics and they are driving the next phase of the digital revolution.
The usage of semiconductors ranges from smartphones and cloud servers to modern cars, industrial automation, critical infrastructure and defence equipment. India's semiconductor market is anticipated to reach USD 20 billion by the year 2026.
The India Semiconductor Mission, a specialised business sector of the Digital India Corporation, was founded by Union Information Technology Minister Ashwini Vaishnaw. The mission’s goal is to create a thriving semiconductor and display ecosystem that will help India become a global leader in electronics manufacture and design.
The global market for the semiconductor industry has a total value of USD 2 trillion. The largest global segment of the industry is computer systems and peripherals, which is over 26 per cent of the overall market. (NITI Aayog).
The Indian semiconductor industry is currently responsible for about 1.5 per cent of world electronic hardware production.
The Gujarat government announced a dedicated ‘Gujarat Semiconductor Policy 2022-27’ on 30 July 2022 with a target to generate at least 2,00,000 new employment opportunities in a period of five years.
The government has also decided to develop a “semicon city” which would be a part of the Dholera Special Investment Region.
What is a semiconductor?
A semiconductor is a substance that has specific electrical properties that enable it to serve as a foundation for computers and other electronic devices. It is typically a solid chemical element or compound that conducts electricity under certain conditions but not others.
This makes it an ideal medium to control electrical current and everyday electrical appliances.
A substance that can conduct electricity is called the conductor and a substance that cannot conduct electricity is known as the insulator. Semiconductors have properties that sit between the conductor and insulator.
A diode, integrated circuit (IC) and transistor are all made from semiconductors.
Within less than two months after the announcement of the policy by the government, two top corporates — Vedanta and Foxconn signed memorandums of understanding (MoUs) with the State government to set up a semiconductor manufacturing facility with an investment of Rs 1.54-lakh crore.
Prime Minister Narendra Modi tweeted “The investment committed by Vedanta and Foxconn Group for setting up the unit in Gujarat will provide an impetus to the ecosystem for ancillary industries and help India's MSMEs.
Vedanta Group's Vedanta Semiconductors will set up an integrated Semiconductor Fab Unit and OSAT (Outsourced semiconductor assembly and test) facility in Gujarat with an investment of Rs 60,000 crore.
The unit will operate on the 28nm technology nodes with a wafer size of 300mm and the display manufacturing unit will produce generation 8 displays catering to small, medium and large applications.
For investors, Gujarat provides a conducive environment to set up semiconductor plants because it was the first to launch a dedicated policy for Semiconductor manufacturing which provided heavy subsidy support on land procurement, capital investment, reimbursements on stamp duty, fixed water tariff, as well as electricity tariff subsidy for a period of 10 years.
Why semiconductor policy can further flourish in Gujarat?
There are many reasons which include the presence of excellent industrial infrastructure, with the support of power, water, gas and other related infrastructure, a world-class export-oriented industrial ecosystem with 48 major ports along with 17 operational airports.
Special investment regions (Dholera SIR, GIDC, estates, the electronic manufacturing cluster at Mundra), availability of skilled manpower required for the electronics manufacturing sector along with state-of-the-art training and skill development centres etc.
Under the new policy:
The state government will provide heavy subsidies on power, land and water tariffs for entrepreneurs interested in investing in semiconductors or display fabrication manufacturing.
The primary objective of the current government is to make Gujarat a forerunner in developing the Electronics System Design & Manufacturing (ESDM) ecosystem.
As per reports, the Gujarat policy focuses on guiding a significant portion of investments made under these India Semiconductor Mission (ISM) policies towards Gujarat.
The policy will provide additional capital assistance at 40 per cent of the capex assistance extended by the Centre for the projects approved under ISM.
The semiconductor policy will provide assistance to one project each, semiconductor and display fabrication. In case of multiple applications, the state-appointed high-powered committee will make recommendations on the basis of the credentials of the projects.
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