Manufacturing Sector

The Ministry of Electronics and Information Technology has announced the Design Linked Incentive (DLI) Scheme to offset the disabilities in the domestic industry involved in semiconductor design in order to not only move up in value-chain but also strengthen the semiconductor chip design ecosystem in the country.

It aims to offer financial incentives as well as design infrastructure support across various stages of development and deployment of semiconductor design(s) for Integrated Circuits (ICs), Chipsets, System on Chips (SoCs), Systems & IP Cores and semiconductor linked design(s) over a period of 5 years.

This scheme can create a difference in the semiconductor manufacturing industry in India in the following ways:

• Promoting R&D: It will provide funds for R&D under rising development costs and fulfil the needs of design that requires 12-20% of company sales back into R&D.
• Establishing semiconductor ecosystem: It will help to create a vibrant semiconductor ecosystem, helping in development of modern complex chips, often leveraging external IP and design support services.
  • It aims to set up the India Chip Centre to host the state-of-the-art design infrastructure and facilitate its access to supported companies.
• Financial support: It aims to provide financial support to companies setting up fabs or semiconductor making plants in India.
  • Under this scheme, a reimbursement of up to 50% of the eligible expenditure subject to a ceiling of Rs.15 Crore per application will be provided as fiscal support to the approved applicants who are engaged in semiconductor design.
  • Further, incentives would be provided to applicants whose semiconductor design and semiconductor linked design are deployed in electronic products.
• Increase competition: The scheme will attract existing and global players as it will support their expenditures related to design software, IP rights, development, testing and deployment. This will encourage innovation in India apart from avoiding dependencies on a few countries or companies.
• Increased capacity: The increased capacity of the semiconductor sector will spur demands from other sectors such as transportation, energy, agriculture etc. which will in turn fuel development of the semiconductor industry.
• Access to larger markets: This scheme will help domestic companies to become part of the global value chain, thereby providing access to larger global markets.

Considering these contributions, this scheme would add to economic strength and contribute towards the creation of a US$1 trillion digital economy with a multiplier effect to achieve a US$5 trillion economy by 2025 provided certain challenges such as rapid changes in technology, high competition, specialisation and expertise, threats to supply chain etc. are addressed. Thus, there is a need to promote research, strengthen the supply chain, improve the patent ecosystem, etc, to realise the true potential of the scheme. The DLI scheme along with the Production-Linked Incentive (PLI) scheme have a crucial role in shaping India as an efficient, equitable, and resilient design and manufacturing hub.