India is providing more than $1 billion in cash to each semiconductor manufacturer that establishes manufacturing plants in the nation, according to recent Reuters news stories. Even for a government that follows its whims rather than the established regulations, such monetary handouts are uncommon.

According to the news agency, an unnamed government official stated that the government will be a buyer and that directives will be implemented in the private market (for companies to buy locally-made chips).

The objective was to capitalize on India’s success in the smartphone assembly business and enhance the overall electronics supply chain, according to the explanation.

Following India’s mobile manufacturing success, which is now second only to China, the Modi government believes it is time to establish chip fabrication companies in the nation.

Although Indian engineers are reputed to be skilled in semiconductor design, the country falls far behind in chip production. The government of Narendra Modi is currently attempting to correct the problem.

This is not, however, the first time India has attempted to manufacture semiconductors. “Instead of progressing step by step, we’ve missed every bus,” a bystander observes.

The post-Covid semiconductor shortage, which struck a variety of businesses as facilities reopened last year following the lifting of lockdowns imposed to combat the pandemic, has prompted India to take action.

Indeed, as economies around the world began to recover from the pandemic’s low point, they had no indication that they were in for another struggle. After the $450 billion semiconductor industry was destroyed by the after-effects of the Covid-19 outbreak, everyone from electronic appliance producers to vehicle manufacturers and mobile phone manufacturers had to halt production.

The crisis was sparked by a significant increase in global demand for consumer electronics as a result of companies’ adoption of work-from-home policies and a steep increase in personal car sales owing to virus fears.

Bulk orders placed by Huawei, a Chinese smartphone manufacturer, to get around a US embargo also slowed the supply of critical components, such as chipsets, to smartphone manufacturers.

After their chipset supplier, MediaTek, a Taiwanese corporation, ran out of stock in India, operations of indigenous mobile phone manufacturers like Lava and Micromax virtually came to a standstill. A contributing aspect was the acceleration of global 5G deployments.

The shortages highlighted the fiction of India’s self-sufficiency, which began with the establishment of the Semiconductor Complex Limited (SCL) in Chandigarh in 1983 by the Indira Gandhi government.

The fabrication unit (fab) was shut down until 1997 due to a mysterious fire in 1989. The origin of the fire is still unknown, however, given that SCL was designing and developing military equipment at the time, there are suspicions of arson.

Motorola, STMicroelectronics, and Matsushita were once interested in constructing India’s sole significant VLSI (very-large-scale integration) fabrication facility. However, delays by the government is seeking a commercial partner or disinvesting the company resulted in chances being missed.

According to reports, the Indian government is working on multibillion-dollar capital support and production linked incentive (PLI) strategy to stimulate semiconductor manufacturing in the nation.

According to a report in the Times of India, senior government officials are currently in talks with some of the world’s leading semiconductor companies, including Taiwan Semiconductor Manufacturing Co. (TSMC), Intel, AMD, United Microelectronics Corp, and Fujitsu.

“The administration is open to discuss capital assistance.” “We’re closer than we’ve ever been,” a source close to the situation stated.

The Prime Minister’s Office is coordinating and closely monitoring the effort to bring semiconductor makers to India, according to the report. Several departments have been tasked with devising a compelling policy to entice businesses to invest in the country.

“The aim is to have officials from several ministries and departments in charge of industries affected by the semiconductor scarcity,” the source stated.

The government is anticipated to provide financial assistance and tariff reductions on some components as part of its support. Additional incentives may be available from the government through programmes such as the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and the Product Liability Insurance (PLI).

India’s hunt for semiconductor:

India’s efforts to recruit semiconductor companies in the past have been thwarted by the country’s shaky infrastructure, inconsistent power supply, bureaucracy, and lack of planning. As a result, India finds itself in an unfavourable situation.

It has several good chip designers, but no fab capabilities. ISRO and DRDO both have fab foundries. However, they are designed largely to meet the needs of the particular organizations and are not as advanced as the most cutting-edge technology available, but the hunt for semiconductor companies is still on.