The Ministry of Electronics and Technology in the Union is exploring the feasibility of implementing a new initiative aimed at boosting the domestic production of electronic components in India. This initiative, similar to a PLI (Production Linked Incentive) scheme, is intended to encourage and facilitate increased manufacturing of electronic components within the country. “That is currently in the works and something on which the ministry is working. The Union Minister is keen on pushing this, and where we expect there would be substantial growth”, said S Krishnan, Secretary, Ministry of Electronics and Information Technology.

While delivering his keynote address on Electronics: Rapidly re-shaping the future at the TN Global Investors Meet 2024, Krishnan said, the component ecosystem is a space where advanced manufacturing can really take place in a significant measure. That’s where states like Tamil Nadu can significantly contribute. "This is an area in which Tamil Nadu will focus on just as we will focus at the Government of India level", he said.

The PLI scheme has proven effective in the electronics sector, particularly in the remarkable strides made in mobile phone manufacturing within the country. The success of the PLI scheme lies in its provision of subsidies, wherein the capital investment may be modest, but the resulting turnover is substantial. Conversely, if the incentive is discontinued or if the required scale and competitiveness are not attained by the time the incentive concludes, there is a risk of reversal, highlighted by the speaker.

Within the bill of materials for electronic items, components are categorized into two main parts: semiconductors and various assemblies and subassemblies found in phones or other electronic devices. It is essential to consider both these components. The semiconductor sector holds paramount importance and is strategically significant for various reasons. The global realization of the importance of a resilient supply chain for these chips became evident during the COVID-19 pandemic.

The Centre’s Semiconductor Mission is probably one of the most ambitious and generous packages that has ever been offered as part of the industrial policy. Tamil Nadu’s semiconductor policy was released with a 50 percent top-up on that. This basically means 75 percent of the entire investment that the government is subsiding, and on a pari passu basis. This is something that I don’t think has been done historically in any other industry. This is a huge incentive structure to which the industry really needs to respond.

In the process of value addition, a significant portion is attributed to the non-semiconductor electronics sector. Traditionally, India possessed strengths in this domain, but some of these strengths eroded post-ITA1 (Information Technology Agreement 1). It is crucial for the country to regain competitive advantages in this area by upgrading technologies and making substantial strides. Drawing lessons from the automobile sector, it becomes evident that strength in components is integral to the overall manufacturing competitiveness of a region. Without robust capabilities in components and component manufacturing, achieving success and competitiveness in the broader field of electronics manufacturing is unlikely.

"We need to have high ambitions in this sector starting with ESDM, moving on to semiconductor, component manufacturing, design and having patents”, he said. What other countries have 30-40 years to do, we would do it in 5-10. If the mobile industry is anything to go by, we have demonstrated to do it in 5-10 years. With the same level of ambition and planning, there is no reason why it should be possible to do the rest of the story in the coming decade", he said.