The scheme, which will run over several years, will support companies across 30 semiconductor and 30 electronics categories, the people cited above said on the condition of anonymity. The incentives will be given based on value of capital investments (capex) as well as turnover of companies.
The idea is to create an ecosystem that encourages tech and design patents, which will not just multiply industry revenue at a later point but also cushion the country against global developments that may thwart imports of key components or products.
A task force of industry veterans created by the Centre last August submitted its report to the ministry of electronics and information technology (Meity) in December. The report is now being assessed by Meity officials and is expected to be submitted for cabinet approval in the coming weeks. Subject to approval, it will then be announced in the coming months.
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“Right now, despite being under global pressure, the US has the likes of Apple, Nvidia and all the other technology companies in India—whose biggest value are their technology reference designs and IPs,” the first official cited above said, adding that the DLI scheme is aimed at giving a boost to product design, fabless chipmakers, original design manufacturers (ODMs) and original equipment manufacturers (OEMs) in India.
According to this official, some products proposed to be included in the scheme are modems, wifi chips, near-field communications chips, geolocation chips, 5G radio frequency receivers, power electronics for electric vehicles (EVs), home gateway and security systems, inverters, smart meters, and industrial control systems, among others.
“Each of these categories, through government incentives, can address up to 60% in domestic value addition (DVA) for which India is currently reliant on other countries,” the official added.
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The second official cited above said active discussions are on for incentivizing product design and IP, but did not offer a timeline for the scheme. “The government’s objective is to build brands that could both serve the domestic market with various government bodies as key customers, and add to exports from India’s electronics economy,” the second official said. “The idea is to keep the growth balanced, so that geopolitical turmoil does not upend the domestic electronics ecosystem by halting exports.”
A third senior government official said that the existing DLI scheme has not been deemed enough by industry, for which “Meity is currently exploring a broader scheme to boost the making of components and technologies from India itself. We’re currently in due process of exploring the same”.
A previous DLI scheme launched in September 2021 under Meity’s India Semiconductor Mission (ISM) offered less than $12 million in net incentives over five years, that too only to five selected companies.
Queries sent to Meity remained unanswered till press time.
Why design is important for a country
Product design is prioritized by technology companies to create core patents and intellectual properties. In the US, companies like Google, Qualcomm, Intel, and Nvidia hold patents for their electronics designs that are licensed by companies around the world to be used in gadgets and enterprise technologies.
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These patents add significant value to the domestic technology ecosystem. As per the Meity task force’s report, 30-60% of a country’s annual electronics industry’s revenue is driven by companies that hold patents in the country.
“Incentivizing component manufacturing is the single-most important objective that India must follow to reduce its foreign import dependency,” said Ashok Chandak, president of industry body, India Electronics and Semiconductor Association (IESA), adding that the association has submitted its observations to incentivize electronics designs in a report to both Meity and the office of the principal scientific advisor.
“This can create a big economic opportunity for companies within India, and future incentive schemes under Meity can offer preferential market access to Indian companies—to ensure that incentives are not being sought just by importing most components and assembling them locally,” Chandak said.
“The idea is to incentivize companies that drive the supply chain, own product specifications, and create technology standards for an industry,” a senior industry executive said, requesting anonymity since they work closely with the government. This executive added that production-linked incentives (PLIs) for mobile phones are ending next year, which means electronics manufacturing services (EMS) firms such as Dixon Technologies, Syrma SGS and others will need to “ramp-up their operating margins, which remain slim even now”.
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The move for a government push for design comes in the backdrop of India’s poor record in the area of tech patents. Earlier this month, Sunil Raina, executive director of India’s sole surviving smartphone brand Lava International, told Mint that research and development to build IPs and patents “is an area that the company is looking to invest in for the future”, while acknowledging that work on value-added IPs and patents have not grown at scale.
“In India, hardly around 60,000 patents are filed each year, in comparison to around 1 million per year from the US and China, each,” Raina said. “There is a huge gap on this note between India and developed technology markets, which needs to be made up in the near term.”
Things may change
For the new scheme, while up to $4 billion in incentives across the electronics and semiconductor industries have been recommended by the task force, the eventual outlay, which will come after Cabinet approval, could vary.
For instance, according to the second official cited above, a part of semiconductor-led design incentives could be merged under ISM, which, too, is due for approval of its second tranche in the coming months.
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A second industry executive said that the DLI scheme “should be rolled out before the second semiconductor incentive scheme’s introduction later this year”. Mint reported in September last year that a multi-year scheme of $15-20 billion is in the works solely for the manufacturing of semiconductor chips and related components.
Last week, Mint reported that India is targeting $50 billion in smartphone exports by 2030—thus underlining a bigger focus from the Centre on India’s electronics exports to the world. As of 2024, as per respective government data, India’s electronics exports are worth less than 2% of China’s—which is also the single largest tech hardware exporter to the US.
