While the geopolitics of oil and gas dominated the global power discourse so far, the modern era lays a special emphasis on those proficient in chip technology. As India looks to be the next semiconductor hub, the Narendra Modi government may look to offer sops to accelerate the process in the Interim Budget.These minuscule chips are the backbone of contemporary technology, powering everything from expensive drones and self-driving automobiles to smartphones. A few nations currently control the majority of the world’s semiconductor market, namely Taiwan, China, the United States, South Korea, and Japan. Even as India jostles to make its presence felt as the next semiconductor hub for the world, it would take a concerted effort and strategy to reach the pinnacle.Potential budget announcement for semiconductors in IndiaA new incentive plan is in the works for the semiconductor industry and will have a corpus of Rs 10,000 crore, ET has reported. However, it will be an upgraded version of the current Scheme for the Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS).ALSO READ: In works: Rs 10,000 crore sop scheme for chip ancillariesThe corpus of the SPECS plan is currently around Rs 3,200–3,300 crore. It could be further structured in a way to disburse funds as and when the companies invest or achieve certain milestones. The SPECS scheme, in its present form, caters to 25 per cent of capital expenditure as a fiscal incentive for the manufacturing of goods that cater to the overall downstream value chain of designated electronic products. It caters to incentivising new units as well as modification/ expansion of existing units. It is likely to be even more enabling in its revised structure with various pragmatic changes, with an overall aim to develop core components for the industry to compete globally, said Anurag Awasthi, Vice President of India Electronics and Semiconductor Association (IESA).Modi govt’s semiconductor push, the story so farThe Centre has already disbursed more than Rs 1,600 crore in product-linked incentive (PLI) schemes to boost electronics manufacturing in the country. In 2023, the government expeditiously advanced its agenda through the Indian Semiconductor Mission (ISM).In June last year, the Idaho-headquartered firm Micron Technologies became the first overseas company to commence construction under ISM and announced a $2.75 billion chip packaging plant in Gujarat. Meanwhile, global technology behemoth Foxconn has also evinced interest in setting up at least four semiconductor fabrication units in India.ALSO READ: How India is trying to build a crucial part of its chip-making projectWhile it’s still in the works, ET had reported in July last year that discussions over technology and joint venture partnerships to establish semiconductor fabrication units in India were underway between the Taiwan Semiconductor Manufacturing Company (TSMC), Foxconn, and Japan’s TMH Group.In other notable developments, chipmaker AMD unveiled a 500,000-square-foot campus in Bengaluru in November 2023, primarily focused on the design and development of semiconductor technology, including 3D stacking, artificial intelligence (AI), machine learning (ML), and more.Meanwhile, Israel’s Tower Semiconductor has also sought guidance from the government on the best possible way to establish a fabrication facility in the country by the end of fiscal year 2024.What India could accomplish with the updated planWith a new incentive plan, the government could provide a much-needed boost to the ancillary industry, a minor but vital component of its goal to produce chips.“To support these ATMP plants, several ancillary industries and component makers are coming to India and are requesting support from the government,” an official aware of the developments has told ET. The raw material suppliers, such as those who offer specialized chemicals and gases needed for semiconductor chip manufacturing, marking, testing, and packaging, are referred to as ancillary units.Over the years, China has emerged as a global chip manufacturing powerhouse as it has invested a lot in establishing an ecosystem to support ancillary units. The production of chips entails a complex value chain in which no single company can own all of the functions. Amidst such challenges, to achieve self-reliance in the chip industry, the Centre needs to provide equal support to the ancillary and components industry, which, while smaller in scale than chip manufacturing units, nonetheless offers a stable foundation for the entire chip industry. The government push to establish a robust ecosystem is a continuous work in progress with the core elements of identification, ideation, stakeholder consultation, curation, and implementation. This is applicable to components, design, and creation of fabless entities, with an emphasis on manufacturing and incorporating the chemical industry, infrastructure development, logistics, and various other sectors to converge to accrue the desired advantage, said Awasthi.Once there is a well-established ecosystem for ancillary and component industries, chip manufacturing units in India could reduce their reliance on imports of components and other requirements. The interim budget is a vote-on-account budget, which would essentially cater for only four months before a formal budgetary outlay is announced in July, Awasthi added. India is first concentrating on chip design, where it has an advantage because of the availability of design engineers, as well as assembly, testing, marking, and packaging (ATMP) and outsourcing semiconductor assembly and testing (OSAT). Moreover, large chip manufacturing factories can be set up with the help of an established ecosystem that includes wafers, specialty chemicals, gases, and materials. The current government policies in the semiconductor space are among the best in the world. More emphasis on a bigger budgetary envelope for skill development, faculty development, and R&D will perhaps be important arenas to be factored in, Awasthi concluded.