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India, EU sign semiconductor pact

  • Category
    Economy
  • Published
    3rd Dec, 2023

Context:

India and the European Union on Friday signed a Memorandum of Understanding on semiconductors that will help in building a “robust supply chain” and support innovation.

Key Objectives of the MoU –

  • Comprehensive Information Exchange: The MoU facilitates detailed information exchange between India and the EU, focusing on their semiconductor ecosystems, fostering collaborative insights, and knowledge-sharing for mutual development.
  • Emphasis on Research, Development, and Innovation: Prioritizing collaboration in critical areas like research, development, and innovation, the agreement involves active participation from universities, research bodies, and businesses in both regions.
  • Addressing Semiconductors as a Strategic Commodity: Acknowledging the strategic importance of semiconductors, the MoU aims to address their significance, especially in diversifying global supply chains and reducing dependence on key players like China.

Current State of Semiconductor Production in India

  • Investing in Semiconductor Fabrication: India has strategically invested substantial funds in semiconductor fabrication, recognizing its pivotal role across industries through the Production-Linked Incentive (PLI) schemes.
  • Underutilized Funds and Strategic Concerns: Despite the financial backing, concerns arise due to the underutilization of these funds, prompting a critical evaluation of the strategy's effectiveness.
  • Strength in Design, Gaps in Manufacturing: India boasts excellence in semiconductor design however, attention is warranted to bridge the gaps in the manufacturing ecosystem. Strengthening this aspect is crucial for a comprehensive and successful semiconductor strategy in the country.

India Semiconductor Mission and PLI Schemes

  • Strategic Mission for Semiconductor Ecosystem: The India Semiconductor Mission (ISM) stands as a pivotal initiative. Despite its significant allocation of funds, the mission faces challenges that need careful consideration.
  • PLI Schemes' Limited Impact: Existing Production-Linked Incentive (PLI) schemes, despite their substantial funding, demonstrate limited promise concerning employment generation and value addition. The need for a more comprehensive approach becomes evident as the impact falls short of expectations.
  • Challenges with Large Manufacturing Emphasis:The emphasis on incentivizing large manufacturing plants raises concerns about the limited scope of these incentives. Multinational chipmakers exhibit hesitancy in making substantial commitments, highlighting the need for a nuanced and adaptable strategy.

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