DLI Scheme

DLI Scheme

Subject – Science and Tech

Context – India has invited applications from 100 domestic companies, startups and small and medium enterprises to become a part of the design-linked incentive (DLI) scheme

Concept –

What is the DLI scheme?

• The DLI scheme aims to provide financial and infrastructural support to companies setting up fabs or semiconductor making plants in India.
• It will offer fiscal support of up to 50% of the total cost to eligible participants who can set up these fabs in the country, MeitY said in a statement.
• It will also offer fiscal support of 30% of the capital expenditure to participants for building compound semiconductors, silicon photonics and sensors fabrication plants in India, under this scheme.
• An incentive of 4% to 6% on net sales will be provided for five years to companies of semiconductor design for integrated circuits, chipsets, system on chips, systems and IP cores.
• It is expected to facilitate the growth of at least 20 such companies which can achieve a turnover of more than ₹1500 crore in the coming five years, according to MeitY.

How can the scheme make a difference in the semiconductor manufacturing industry in India?

• Schemes like the DLI are crucial to avoid high dependencies on a few countries or companies.
• The DLI scheme aims to attract existing and global players as it will support their expenditures related to design software, IP rights, development, testing and deployment. It will boost the domestic companies, start-ups, and MSMEs to develop and deploy the semiconductor design. It will also help global investors to choose India as their preferred investment destination.

What are other countries doing to be dominant in the race of chip making?

• Currently, semiconductor manufacturing is dominated by companies in the U.S., Japan, South Korea, Taiwan, Israel and the Netherlands. They are also making efforts in solving the chip shortage problem.
• These chipmakers produce up to 70% of the world’s semiconductors.

What are the challenges in making semiconductors in India?

• In India, more than 90% of global companies already have their R&D and design centres for semiconductors but never established their fabrication units.
• Although India has semiconductor fabs in Mohali and Bangalore t they are purely strategic for defence and space applications only.
• Setting up fabs is capital intensive and needs investment in the range of $5 billion to $10 billion. Lack of investments and supportive government policies are some of the challenges to set up fabs in India.
• New fabs use sub 5 nano meter technology that requires clearance from both the technology provider and the Government. So, a combination of capital and the geopolitical situation comes into play to build new fabs.
• Infrastructure like connectivity to airports, seaports and availability of gallons of pure water as challenges to set up fabs in India. He, however, reckons that several gases and minerals which are a part of the global semiconductor supply chain are produced in India.
• Mobiles, wearables, IT and industrial components are the leading segments in the Indian semiconductor industry contributing around 80% of the revenues in 2021.
• Design Linked Incentive (DLI) scheme along with the recent Production-Linked Incentive (PLI) scheme have become crucial in shaping India as an efficient, equitable, and resilient design and manufacturing hub.