The mid-term appraisal of the semiconductor Design-Linked Incentive (DLI) scheme is due soon. Since its announcement, the DLI scheme has approved only seven start-ups, markedly short of its target of supporting 100 over five years. This impact assessment, therefore, presents an opportunity for policymakers to appraise and revamp the scheme.
India’s $10 billion Semicon India Program has had mixed results, at best. There are three goals of India’s semiconductor strategy. The first is to reduce dependence on semiconductor imports, particularly from China, and especially in strategic and emerging sectors, ranging from defence applications to Artificial Intelligence development. The second is to build supply chain resilience by integrating into the semiconductor global value chain (GVC). The third is to double down on India’s comparative advantage: India already plays host to the design houses of every major global semiconductor industry player and Indian chip design engineers are an indispensable part of the semiconductor GVC.
These goals will help cement India’s status as a semiconductor powerhouse. However, resources are limited. Therefore, priorities for industrial policy should ensure that we reap disproportionate benefits from our investments. Stimulating the design ecosystem is less capital-intensive than the foundry and assembly stages of the semiconductor GVC. Bolstering this stage can help establish strong forward linkages to an up-and-coming fabrication and assembly industry in India. Therefore, it is odd to note a concerted lack of policy scrutiny of the DLI scheme’s lack of results, while Production-Linked Incentive schemes for foundries and assembly stages received quick revisions post notification.
