India has received investment proposals worth $20.5 billion from five firms, including Singapore’s IGSS Ventures, to set up semiconductor and display manufacturing plants in the country.

Semiconductors, also known as chips, are the building blocks of electronic devices ranging from smartphones and cloud servers to modern cars, industrial automation, critical infrastructure and defence systems.

Mining baron Anil Agarwal-led Vedanta's joint venture with Taiwan's electronic contract manufacturer Foxconn, IGSS Ventures, and ISMC have submitted applications for setting up semiconductor plants in the country amid a global shortage of chips in the post-pandemic world. "The applications have been received for setting up 28 nm (nanometre) to 65 nm Semiconductor Fabs with capacity of approximately 120,000 wafers per month and the projected investment of $13.6 billion," the government said in a statement.

These entities have sought a fiscal support of $5.6 billion from the government under the Semicon India Programme.

The programme, approved by the government last year, has a production-linked incentive outlay of about $10 billion to help develop a sustainable semiconductor and display ecosystem in India, as the China-Plus-One strategy, which seeks to reduce the dependence of businesses on China as a manufacturing hub and diversify supply chains, gains momentum.

The Indian semiconductor market, which was worth $15 billion in 2020, is estimated to swell to $63 billion by 2026.

Vedanta and Elest have submitted applications for display manufacturing units with a proposed investment of $6.7 billion, and the two entities have sought a financial support of nearly $2.7 billion.

India’s market size for displays, which constitute a significant portion of the electronic products, is expected to more than double to $15 billion by 2025, from $7 billion currently.

These investment proposals come at a time when the manufacturers of cars, smartphones, laptops, washing machines, and other electronic goods globally are facing an acute shortage of chips, leading to production delays.  

The work-from-home orders, issued in the wake of the pandemic, led to a dramatic surge in demand for gadgets such as mobile phones and computers, prompting chip manufacturers to divert most of their output to these devices needed for business continuity.

India’s production-linked incentive scheme, aimed at boosting the country’s manufacturing prowess, is estimated to attract an investment of Rs 4 trillion in the next five years, potentially generating 3 million jobs, ratings agency ICRA, majority-owned by Moody’s Corp, has said.