Semiconductor assembly majors plan to set up manufacturing units in India

Four top global companies in the assembly, testing, marking, and packaging (ATMP) business have had discussions with the government to set up their manufacturing units and develop export hubs to undertake outsourced semiconductor packaging and test services. The companies —Taiwanese majors ASE Technology Holding (with revenues of $11.87 billion), Powertech Technology Inc ($2.17 billion), and SPIL ($2.79 billion), and US-based Amkor Technology ($4.31 billion) — plan to take advantage of the incentive schemes recently announced by the government. 

ATMP companies undertake third-party integrated circuit (IC) packaging and test services for fabrication or semiconductor companies, as well as fabless companies, and supply to companies manufacturing mobile devices, medical electronics, telecom, IoT (internet of things), consumer electronics, and machines, among others. They also test devices before shipping them to the market. Their current market size globally is over $30 billion, which is projected to go up to more than $44 billion by 2026.

India does not have any notable players in the ATMP space. If the current talks with the ATMP big boys fructify, it will be a major step for the country. Emails sent to the four companies did not elicit any response.  

The discussion with global ATMP players is part of the government’s outreach to leading companies in the space so that they can participate in the incentives that have been recently given to the industry. These include the production-linked incentive scheme (PLI) for exports, the scheme for the promotion of electronic components and semi-conductors (SPECS), and a modified electronic manufacturing cluster scheme.

Under the PLI scheme, global players are being offered a 4 to 6 per cent incentive for five years to encourage them to set up operations in India, with a focus on exports. 

The government is also providing a 25 per cent incentive on capital expenditure on a reimbursement basis under SPECS to those who start production facilities. 

The companies will also be supported by state governments, which will provide incentives such as capex-linked subsidy, amongst others.

The ministry of electronics and information technology estimates that the measures would lower the cost of manufacturing in India for these companies by 6 per cent to 10.7 per cent compared to that in competing countries.

The PLI scheme for components, including ATMP, will be provided to 10 companies — but they have to apply by 31 July. In case the government receives applications in excess, the companies' global revenues will be the criterion for determining the top 10.

Under the terms of the schemes, companies have to invest Rs 100 crore in four years and sell components incrementally of up to Rs 3,000 crore by the fifth year of operations.  

A separate PLI scheme is being offered to global mobile device manufacturers. The move is expected to attract big players like Apple, which is already in talks with their vendors, Wistron and Foxconn, to shift a part of their capacity from China to India. Others who have shown interest include Flextronics and Samsung. Even Indian players like Lava Mobiles, for whom there is a separate PLI scheme, have stated that they will apply for it.