Indian Government Plans Update SPECS to Become a Rs 10,000 Crore Scheme

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The upcoming version of SPECS will focus on supporting MSMEs and startups engaged in R&D for the semiconductor industry.

The Indian government is set to introduce an enhanced incentive scheme, estimated at up to Rs 10,000 crore, to support the establishment of electronic and semiconductor component factories. The new scheme, expected to roll out at the start of the next fiscal year, will update the current Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS).

The updated scheme may adopt a ‘pari-passu’ basis for distributing funds, a method where incentives are released as companies reach investment milestones or achieve specific targets. This change aims to bolster the ecosystem for the assembly, testing, marking, and packaging (ATMP) units being set up by companies like Micron, Tata Electronics, and Kaynes Corp.

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The current SPECS scheme, with a corpus of around Rs 3200-3300 crore, is nearing its allocation limit. Officials are considering significantly increasing this fund for the revised scheme. The SPECS scheme, launched in April 2020 with a three-year duration, is currently advising companies to wait for the revised version before submitting applications.

The upcoming version of SPECS is also expected to foster more research and development in the sector, with a focus on supporting micro, small and medium enterprises (MSMEs) and startups engaged in R&D for the semiconductor industry. As of October 2023, the IT ministry has approved 38 applications under SPECS, involving a proposed investment of Rs 11,485 crore and committed incentives of Rs 1,574 crore.

In addition to these major players, other companies, including the HCL Group and the Murugappa Group, are also making moves to enter the sector. The influx of ancillary industries and component manufacturers, essential for supporting ATMP plants, is driving the need for government support. These ancillary units typically supply raw materials, specialty chemicals, and gases used in semiconductor chip fabrication.

With Micron’s approval to establish an ATMP unit in Sanand, Gujarat, there’s an increasing number of suppliers seeking to establish nearby facilities to support this semiconductor major. This trend is expected to continue wherever new chip fabrication units are established.

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