Electronics development fund to promote innovation soon: Official

BANGALORE - The central government is in the process of setting up an electronics development fund to promote innovation, research and development (R&D), intellectual property (IP) and manufacturing in the electronics sector, a senior official said Monday.

“The government is in the process of formulating major initiatives, including setting up an electronics development fund (EDF) to help India become a major global producer of electronic goods and to meet the rising domestic and export demand,” Ajay Kumar, joint secretary in the information technology (IT) department, said at a semiconductor (semicon) conference here.

The department had also set up a peer review committee in January to study the recommendations of its task force on modifying the special incentive package scheme (SIPS) of 2007, which elicited a lukewarm response from the fledgling semiconductor industry.

“A modified SIPS, which is under the consideration of the government, will try to address the deficiencies in the earlier scheme and meet the needs of all types units in the electronics value chain. We are striving to get approvals for the scheme at the earliest,” he told about 300 delegates at the sixth Vision Summit of the Indian Semiconductor Association (ISA).

The task force has estimated that the demand for electronics hardware in the domestic market will zoom to a whopping $400 billion by 2020 from $45 billion in 2009, while the global demand is expected to be about $2.4 trillion by end of this decade.

“At the current rate of growth, as the domestic production can cater to a demand of $104 billion by 2020, the remaining demand has to be met by imports, which implies a huge opportunity for the Indian semicon and electronics industry to bridge the gap,” Ajay Kumar said.

Noting that the average value addition in domestic production of electronic hardware was abysmally low, he said increasing self-reliance by creating products for the domestic market would be a key focus area for the industry during this decade.

Referring to the niche the Indian software and business process outsourcing (BPO) services had created worldwide, Ajay Kumar said the time had come to demonstrate leadership position by building capabilities in IC (integrated circuit) design, IC fabrication and design and manufacturing of electronics products.

The demand for electronics goods is growing exponentially from diverse sectors such as telecom, IT, power, automobile and consumer electronics.

“About $2 billion worth chip designs, developed by about 20,000 talented professionals, are being exported from India. With most of the semiconductor fabrication companies setting up their R&D and design centers in India, the electronics hardware manufacturing industry should capitalise on the emerging opportunities in the cutting edge of technology,” he stressed.

The three-year-old package (SIPS) was unveiled to address the disability costs faced by the electronic manufacturing units due to higher costs of logistics, energy and transactions. As part of the scheme, the government had also proposed to provide support up to 20 percent for units under SEZ (Special Economic Zone) and 25 percent for units outside it, with threshold investments of Rs.2,500 crore for fab (fabrication) units and Rs.1,000 crore for the eco-system units.