Design Linked Incentive (DLI) Scheme

Design Linked Incentive (DLI) Scheme

Design Linked Incentive (DLI) Scheme

What are Semiconductors?

  • Semiconductors or chipsets are used in all modern electronic devices and technologies, with a range of applications that range from electronic products and IT hardware to defense technology, industrial electronics, medical electronics, and automation (workplace, healthcare, manufacturing, etc.)
  • Such devices have found wide application because of their compactness, reliability, power efficiency, and low cost.
  • As discrete components, they have found use in power devices, optical sensors, and light emitters, including solid-state lasers.

What is a Design-linked incentive (DLI) scheme for semiconductors?

  •  It offers financial incentives, design infrastructure support across various stages of development and deployment of semiconductor design for Integrated Circuits (ICs), Chipsets, Systems on Chips (SoCs), Systems & IP Cores, and semiconductor-linked design.
  • Nodal Agency: C-DAC (Centre for Development of Advanced Computing), a scientific society operating under MeitY, will serve as the nodal agency for the implementation of the DLI scheme.
  • 3 Components of Design-linked incentive DLI scheme:
    • Chip Design Infrastructure Support: Under this, C-DAC will set up the India Chip Centre to host the state-of-the-art design infrastructure (viz. EDA Tools, IP Cores, and support for MPW (Multi multi-project wafer fabrication) & post-silicon validation) and facilitate its access to supported companies.
    • Product Design Linked Incentive: Under this, a reimbursement of up to 50% of the eligible expenditure subject to a ceiling of Rs.15 Crore per application will be provided as fiscal support to the approved applicants who are engaged in semiconductor design.
    • Deployment Linked Incentive: Under this, an incentive of 6% to 4% of net sales turnover over 5 years subject to a ceiling of Rs.30 Crore per application will be provided to approved applicants whose semiconductor design for Integrated Circuits (ICs), Chipsets, System on Chips (SoCs), Systems & IP Cores and semiconductor linked design are deployed in electronic products.

Objectives of Design-linked Incentive DLI scheme

  • Nurturing and facilitating the growth of domestic companies, startups, and MSMEs.
  • Achieving significant indigenization in semiconductor content and IPs involved in the electronic products deployed in the country, thereby facilitating import substitution and value addition in the electronics sector.
  • Strengthening and facilitating access to semiconductor design infrastructure for startups and MSMEs.

Design-linked incentive DLI scheme Tenure

The Design-linked incentive DLI scheme shall be initially three years from 01-01-2022. However, in January 2024, the government extended the deadline for applications for the scheme until March 31, 2024.

Growing semiconductor demand in India

  • The semiconductor industry is growing fast and can reach 1 trillion dollars in this decade. India can grow fast and reach $64 billion by 2026 from $27 billion today.
  • Mobiles, wearables, IT, and industrial components are the leading segments in the Indian semiconductor industry contributing around 80% of the revenues in 2021.
  • The mobile and wearables segment is valued at $13.8 billion and is expected to reach $31.5 billion in 2026.

Challenges in India

  • No incubation: In India, more than 90% of global companies already have their R&D and design centers for semiconductors but never established their fabrication units.
  • Strategic sector: Although India has semiconductor fabs in Mohali and Bangalore, they are purely strategic for defense and space applications only
  • Capital requirement: Setting up fabs is capital intensive and needs investment in the range of $5 billion to $10 billion.
  • Lack of supportive policies: Lack of investments and supportive government policies are some of the challenges to setting up fabs in India.
  • Geopolitical limitations: A combination of capital and the geopolitical situation comes into play to build new fabs.

Related Links

Production Linked Incentive (PLI) SchemesSemicon India Programme
Chip 4 or Fab 4 AllianceNational Logistics Policy