Good news for auto sector: Indian govt approves ₹76k cr scheme for chip making

The Union Cabinet on Wednesday has approved a production linked incentive (PLI) scheme for the semiconductor and display board production in the country, I&B Minister Anurag Thakur said. The PLI scheme envisages an investment of ₹76,000 crore in semiconductor manufacturing in the country over the next 5-6 years.

This comes added to the ₹50,000 crore PLI scheme that was announced in November 2020 to woo electronics manufacturing in India. The PLI scheme at large also covers automobile manufacturing, auto component manufacturing and electric vehicle ecosystem developers as well.

Speaking about the decision, Telecom and IT Minister Ashwini Vaishnaw said that this will help design, fabrication, packing and testing of the microchips and develop a complete ecosystem.

This PLI scheme for chip manufacturing in India is expected to help the country's auto sector significantly. Like the rest of the global auto industry, the Indian auto sector too faced major headwinds due to the chip shortage that emerged due to the Covid-19 pandemic.

With the mobility restrictions and majority of the world under lockdown last year, demands for the chips from consumer tech product manufacturers increased substantially. The chip makers too shifted their production capacity accordingly. Later when the auto industry restarted operation and demand for microchips increased significantly, a major disruption occurred as chip manufacturers were unable to cater to the demand.

Since then there were discussions about building a local chip manufacturing ecosystem that can support the auto industry and other relevant sectors as well. With the newly approved PLI scheme for the microchip manufacturing sector, the concern is expected to be addressed.

The timing of the semiconductor PLI scheme is pretty crucial. It comes at a time when companies across the world have been suffering a semiconductor shortage that has been going on for several months now.