India’s path towards technology sovereignty-building a resilient electronics and semiconductor manufacturing ecosystem Expectations from Union Budget
To support supply chain resilience and India’s participation in GVCs, the country is required to achieve readiness and maturity across critical supporting industries. A continued policy push towards electronic components and semiconductor manufacturing is critical to ensure supply chain ecosystem development, reducing lead times and improve reliability.
The incentive outlay for the MSME sector in India for electronic components remains limited. With MSMEs contributing approximately 25–35% of the industry, capital support along with continued access to advanced technology and skilled talent is critical to ensure the development of a robust component ecosystem moving forward. To sustain chip production in India, it is imperative to extend the focus from fabs towards development of critical input materials such as gases, chemicals, and substrates. Incentive support, infrastructure readiness. and promotion of long-term strategic partnerships will be essential to attract players who have the potential to supply domestically to Indian manufacturers, thereby enabling investors to save costs on logistics.
In line with the Government of India’s vision of building self-reliance in semiconductor manufacturing, in addition to critical utilities such as power supply and ultra-pure water supply, establishment of industry benchmarks across road infrastructure, cold-chain logistics for high-precision equipment, and transportation systems to handle high-purity gases is essential.
Incentives to raise R&D expenditure, IP development, and retention are required to increase technological advancement and industrial competitiveness, thereby enhancing industry–academia collaboration.
To support skilling and workforce development, a focused approach towards the development of a robust talent pipeline with establishment of dedicated training fabs, cleanroom simulation facilities, etc., is critical.
Incremental incentives for exporting electronics and semiconductor products, such as tax and duty rationalisation, export subsidies, access to low-cost capital, or other support mechanisms can cumulatively help boost exports for Indian electronics. With 46 applicants approved under the ECMS scheme, component manufacturing is expected to scale up. However, effective integration of tier-2 and tier-3 suppliers will be critical to ensure high domestic value addition. Incentives for exporting electronics and semiconductor products, such as duty drawbacks, export subsidies, or other support mechanisms and similarly for rationalisation of import duties on essential components, raw materials, and equipment to reduce costs can cumulatively help boost exports for Indian electronics.
Backward integration of finished goods manufacturers in consumer electronics should be encouraged by continuing and increasing benefits–such as Production Linked Incentive (PLI) for white goods—that focus on manufacturing of compressors, copper tubes, and assembling of controller units. It would create value chain localisation and in-house design capabilities, thereby harnessing additional savings through efficiency gains and encouraging Indian manufacturers to overcome the learning curve.
