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India-Singapore ESDM industry collaboration opportunities An IESA-SSIA-EY report

India-Singapore ESDM industry collaboration opportunities 2

Contents

1. Executive summary 4

2. Introduction to ESDM industry 8 2.1 Definitions 8 2.2 Indian ESDM industry overview 9 2.3 Singapore ESDM industry overview 12 2.4 Key players in India and Singapore ESDM value chain 14

3. Opportunities for cross-border alliances: India and Singapore 18 3.1 Key propositions of Indian ecosystem 18 3.2 Key propositions of Singapore ecosystem 23 3.3 Identification of opportunity areas in both the countries 28

4. Bilateral trade between India and Singapore: current status and vision for 2025 31

5. Recommendations for collaboration areas in ESDM sector 33 5.1 Business to business opportunities 33 5.2 Government-to-government opportunities 35

6. Appendix 38

7. References 48


Executive summary


1. Executive summary Global electronics production is estimated at US$1.9 trillion for 2013, which grew by 4.4% year-on-year (y-o-y). The electronics industry is expected to continue its modest growth due to the revival in the global economy, and will be driven by rapid growth of consumer electronics in emerging economies and the burgeoning demand for smartphones and tablets.

Between 2010–15, the Indian ESDM market is estimated to grow at more than twice the rate of growth of the global ESDM market. From US$59.0 billion in 2010 (US$75.6 billion in 2013), the industry is expected to grow at a CAGR of 9.9% from 2010 till 2015 to reach US$94.2 billion. This growth is led by an increasing apetite for high-end technology devices complemented by increasing disposable income in the country and countinous price erosion in electronic products. In addition to considerable consumer demand, there is a robust demand for ESDM from the Government of India. The Government has announced various initiatives, such as Smart Cities and Digital India, that are expected to lead to increase the consumption of electronic products in the country.

The Singapore ESDM market is also experiencing a strong growth, with manufacturing output in the electronics sector reaching US$64.1 billion in 2013, contributing 27.8% to Singapore’s manufacturing value-add. Similar to India, Singapore’s electronics demand is driven by a tech-savy population and a progressive government that aims to develop a globally competitive ICT industry in Singapore and become the first smart nation of the world.

India and Singapore are two countries with varied strengths and opportunities in their respective ESDM industries. India has a considerable domestic ESDM market, but lacks adequate manufacturing capacity. The demand-supply gap is expected to widen up to US$300 billion by 2020 as the demand is expected to reach US$400 billion while production and services is estimated to be around US$100 billion. The Government of India, through its “Make in India” initiative, is increasing its focus on this sector, and aims to transform it from a consumption-driven market to one with manufacturing capability to meet local and export-related demand. Several incentives are being offered by the Government including financial assistance in setting up electronics manufacturing clusters, capital subsidies to ESDM manufacturing units, setting up of two semiconductor fabrication units, and approval for Electronics Development Fund to fund start-ups.

On the other hand, Singapore is one of the leading manufacturers of electronics products. With approximately 40 IC design companies, 14 silicon wafer fabs and 20 assembly and test units, Singapore nurtures an end-to-end ESDM ecosystem. The country offers pro-business government policies and an innovation-centric envrionment with R&D incentives and infrastructure supported by the Government.

Together, the two countries can derive considerable synergies from opportunties and complementary strengths that each has to offer. With its strong experience in the manufacturing side of the ESDM value chain, Singapore can help India boost domestic manufacturing capabilities by imparting technological expertise. Singaporean companies can manufacture and supply components to EMS providers in India as well as capital equipment, and support ecoystem for building wafer fabs and electronics manufacturing units. On the other hand, while Singapore has a limited strength of IC design talent pool, India has a large skilled, experienced and fresh talent pool that can provide quick scalability to Singapore’s design industry. In addtion, Singapore electronics export is declining and is increasingly facing stiff competition from low-cost manufacturing locations. Singapore can address that competition by leveraging the low-cost advantage India has to offer and shifting some of the labor-intensive operations to India. Indian companies can also expand their operations in Singapore to move closer to emerging economies of South East Asia, to better understand and serve those markets.

At the government-to-government level as well, several collaboration opportunities exist. The two countries should identify focus areas for conducting joint R&D, which should be mutually beneficial to both the countries. In addition, partnerships between sector skill councils as well as implemention of common standards in area of electronics design, manufacturing and testing, are other important areas where governments can collaborate.


The chart below captures the opportunities and collaboration areas for the two countries.

*Note: For Vision 2025, it is estimated that with the new government initiatives in both the countries and expected increase in synergies between both countries, there will an approximately 3%-4% increase in trade growth rates till 2025.

Electronics Imports from Singapore to reach

US$11 billion

Electronics exports to Singapore to reach

US$3 billion

CAGR Growth

Vision 2025

14%

18%


Vision 2025 for bilateral trade relationship

Singapore and India have traditionally shared a strong trade relationship. Singapore is the seventh-largest source of investment in India and is the country's largest trade and investment partner in the ASEAN as it accounted for 25% of FDI inflows in 2013–14. Economic and commercial ties have expanded significantly, particularly after the conclusion of the Comprehensive Economic Cooperation Agreement (CECA) in 2005.

Since 2005, a healthy expansion in bilateral trade and investment has taken place between the two countries. The number of Indian companies with operations in Singapore jumped to 6,000 in 2014 from 1,100 in 2000. Bilateral trade has grown from US$8.8 billion in 2005–06 to US$19.3 billion in 2013–14. Exports from India to Singapore were estimated at US$12.5 billion while India's imports from Singapore were US$6.7 billion in 2013–14.

Electronic items are India’s largest imports from Singapore, since they account for close to one-third of total imports. The electronics import from Singapore to India has increased from US$1 billion in 2004–05 to close to US$2.7 billion in 2013–14. With the interventions of governments of the two countries to boost the ESDM trade, as well as strong collaboration at an industry level, there is a strong potential for the growth of import/export of electronics across India and Singapore. These synergies could potentially lead to a CAGR of 14% over the next 10 years for imports growth from Singapore to India, taking the trade to US$11.2 billion in 2024–25. Similarly ESDM exports from India to Singapore can potentially increase from US$151 million in 2004–05 and US$500 million in 2013–14 to reach US$3.1 billion by 2024–25, growing at a CAGR of 18%. This will, in turn boost the overall bilateral trade between both the countries and lead to a stronger economic relationship in future.

Introduction to ESDM industry


2. Introduction to ESDM industry 2.1 Definitions The ESDM industry constitutes the following sub-segments:

Electronic products: These constitute the total market for electronic products (produced locally or imported) for domestic consumption as well as export of electronic products manufactured in a country.

Electronic components: These include revenues generated from local manufacturing of electronic components.

Semiconductor design: This includes revenues generated by semiconductor design-related activities of local players and captives of semiconductor MNCs operating in a country. It includes revenues from embedded software, very large scale integration (VLSI) and hardware/board design.

EMS services: These include revenues generated by EMS services delivered from a country.

Semiconductor fabrication: This includes revenues generated by foundries through fabrication of semiconductors.

Equipment manufacturing: This includes revenues generated from semiconductor manufacturing equipment.

ESDM industry

Electronic components

Semiconductor design

Electronic manufacturing

services

Semiconductor fabrication

Equipment manufacturing

Electronic products


2.2 Indian ESDM industry overview India’s ESDM industry is estimated to have clocked revenues of US$75.6 billion in 2013, growing by 10.7% as compared to 2012. The industry is expected to grow at a CAGR of 9.9% from 2010 till 2015 (at more than twice the growth rate of the global ESDM market) to reach US$94.2 billion.

Figure 1: Indian ESDM industry revenues (US$ billion)

Source: IESA-F&S study

The electronic products segment forms the biggest chunk of India’s ESDM market, with an estimated 79% market share in 2013. Semiconductor design forms 15% of the market, while electronic components and EMS services form a very small portion with revenue contribution of 5% and 1%, respectively. In addition, product revenues constitute the bulk of revenues in the ESDM industry and account for 84% of the market, with services contributing the remaining 16%. Domestic revenues account for approximately 70% of the industry’s revenues, while exports form the remaining 30%. The bulk of revenues from export are generated by export of semiconductor design and electronic products, with electronic components and manufacturing services constituting a small portion of this.

Figure 2: ESDM industry revenues in India in 2013 (by category)

Source: IESA-F&S study, EY estimates

59.0 64.6 68.3

75.6 84.2

94.2

2010 2011 2012 2013 2014 2015

Rev

enue

s (U

S$ b

illio

n)

79%

5%

15% 1%

Electronic products

Electronic components

Semiconductor design

Electronics manufacturing services

CAGR 9.9%


2.2.1 Growth drivers The robust growth of India’s electronics industry is attributed to multitude factors including the following1:

Adoption of high-end technology devices

Introduction of new technologies, such as high definition (HD), 3D technology, smart TV (voice recognition and gesture control), internet browsing, Bluetooth connection and wireless AV in LEDs/LCDs, in the consumer electronics segment is driving replacement of CRT with LCD/LED TVs. Furthermore, direct-to-home TV broadcasting technology in televisions, RFID technology in smart refrigerators, etc., and energy-efficient technology across all product segments is leading to robust growth of the electronics segment. In addition, the increasing preference for high-end technology devices such as tablets, smartphones and ultrabooks is leading to a fast-growing electronics industry in the country.

Growing middle class and declining electronic prices

India’s middle class is growing at a rapid pace. This has resulted in increased affordability of electronics products. According to a survey of middle class households’ incomes and expenditure, conducted by the National Council for Applied Economic Research (NCAER), there will be an increase in the number of households with annual incomes of more than US$1,850 by 2015. Increasing disposable incomes and the shift in consumers’ preference for products and devices with “smart” technology (such as smart LED TVs) and innovative designs has increased the demand for electronic goods. This has a direct and positive correlation with consumers’ propensity to spend on electronic products. The declining price of electronic items is another factor driving its demand.

Government initiatives

The Government is one of the largest creators of demand in India’s electronics sector. Several initiatives have been undertaken by the Central and state governments that are providing a significant boost to consumption of electronic products in the country. Some of these include:

Digital India campaigni

As part of the “Digital India” campaign, the Government aims to improve access to government services to citizens through IT-enabled platforms (e-Governance initiatives), enable improved transparency in government processes, provide broadband connectivity at the village level (250,000 villages to be connected), Wi-Fi facilities in 250,000 schools and universities and create 400,000 public internet access points. The overall spending in several programs under the Digital India campaign is expected to be around US$16.4 billion. According to Gartner estimates, IT spending by the GoI is expected to increase to US$7.2 billion in 2015 as compared to US$6.6 billion expected in 2015.

Smart cities project

An amount of US$1.2 billion has been provided in the FY15 budget to achieve the Government’s vision of developing 100 “Smart Cities” as satellite towns of larger cities and by modernizing existing mid-size cities. In addition, the Government also aims to allocate US$20.6 million through the PPP mode, since 50% funding for at least 5 prototype projects each from following “Internet of Things” categories — smart city, smart water, smart environment, smart health, smart waste management, smart agriculture, smart safety and smart supply chain and logistics.

Government cloud initiative — Meghraj

The Government is also focusing on an ambitious cloud initiative — “GI Cloud” or “Meghraj” — to drive proliferation and adoption of cloud technology in government departments at Central and state levels for effective delivery of e-Governance services. This is also driving the demand for IT infrastructure including large-scale data centers, which are expected to drive the demand for storage, servers, network components and associated electronic products further.

1 1 USD = 60.8 INR

1 USD = 1.26 SGD


Investment in solar power projects

The Government has proposed to take up Ultra Mega Solar Power Projects in Rajasthan, Gujarat, Tamil Nadu and Ladakh in J&K setting aside a sum of US$82.2 million for these. The Government is also launching a new scheme for solar power driven agricultural pump sets and water pumping stations for energizing 0.5 million pump sets. An amount of US$65.8 million is allocated for this purpose. An additional US$16.4 million is being set aside to develop 1 MW solar parks on the banks of canals.

Strong growth of telecom infrastructure

Rollout of LTE services in India is expected to lead to high demand for telecom infrastructure in the country. The rapid growth in the number of internet and broadband subscribers in the country is further accelerating the growth of this segment. This is expected to continue to drive the telecom infrastructure market in coming years.


2.3 Singapore ESDM industry overview The Singapore ESDM market is experiencing a strong growth as the consumer electronics market is expected to reach US$4.2 billion in 2014, growing at 6.7% y-o-y. In 2013, manufacturing output in the electronics sector reached US$64.1 billion, contributing 27.8% to Singapore’s manufacturing value-add.

Singapore had US$12.7 billion of investment in fixed assets in 2012. Electronics was the second largest contributor, accounting for 38.8% of total investments. The US$4.9 billion fixed asset investment in electronics has contributed close to US$1.4 billion in value added (VA) per annum to Singapore’s GDP.

The Monetary Authority of Singapore (MAS) suggests that the manufacturing sector is likely to see some growth in the value chain of high margin activities such as research and development, and services. For example, there has been a significant increase in investment by semiconductor companies in Singapore with the intention to expand R&D and supply chain operations.

2.3.1 Growth drivers The robust growth of Singapore’s electronics industry is attributed to many factors including the following:

Tech-savvy population

Singapore has a tech-literate population and has a strong demand for high-end products. By the end of 2013, 87% of households had access to computers. With the shift towards a trend of multiple-PC-owning households, there is an increasing demand for tablets and ultra-light books. The adoption of tablets is very fast in the country with third-highest penetration rate. In terms of smartphones, the country has shown preference for high-tier smartphones and is expected to have robust demand for upgrade to higher specification devices and 4G LTE compatible devices. Singapore already has one of the highest smartphone penetration is the world with close to 70% in 2013. The country has above average replacement rates for smartphones, tablets and notebooks, leading to a robust electronics demand in the country.

Improved spending capacity and price erosion

Per capita consumer electronics spending is higher in Singapore as compared to other Asian markets. The spending on high-end technology is supported by short replacement cycle, wage growth, led by tight labor market conditions, and availability of low-priced products due to price erosion in products such as TVs and notebooks. The flat-screen TV registered double-digit price erosion in 2013 as new technologies such as Ultra-HD TV and OLED TV came into the market. In 2014, a new round of price erosion is expected in the Singapore handset market, as low-cost smartphone vendors are penetrating this market. Therefore, increased capability of spending, along with availability of low priced electronics good is expected to push up the demand for electronics in the Singapore market.

Government initiatives

The Government has taken many initiatives to create demand in Singapore’s electronics sector. These initiatives are providing a significant boost to consumption of electronic products in the country. Some of these include:

Intelligent Nation 2015 (iN2015)ii

As part of “iN2015” plan, the Government aims to establish an ultra-high speed, pervasive and trusted infocomm infrastructure by 2015 in the country. It aims to provide free Wi-Fi with access speed of up to 2Mbps and introduce infocomm in other sectors. The Singapore Government has introduced Telehealth, which enables medical caregivers to remotely monitor chronic disease patients; mobile commerce and services in hospitality, tourism and retail; digitalized learning in education and e-freight@Singapore to increase productivity of air cargo logistics sector. Under this plan, the Government has introduced more than 100 one of its kind mobile services from government agencies, non-government entities and has helped 5,000 SMEs to use infocomm and 3,000 SMEs to adopt cloud solutions.iii


Next Generation Nationwide Broadband Network (Next Gen NBN)

Singapore’s Next Gen NBN is a Fiber-to-Anywhere network project under the country’s iN2015 ICT master plan. The Next Gen NBN will help to transform Singapore into an intelligent nation and a global city, powered by info-communications. Next Gen NBN aims to provide a nationwide ultra-high speed broadband access of 1Gbps and more, to all physical addresses including homes, schools, government buildings, businesses, hospitals and NBAPs (Non-Building Access Points). The Singapore Government has provided a grant of up to US$595.2 million to build and operate the passive infrastructure and support the network rollout.

Smart nation planiv

The Singapore Government has rolled out various initiatives including a new platform that encompasses the necessary infrastructure and technical architecture to support a smart nation ecosystem. Initiatives such as Smart Nation Operating System, Internet of Things scheme targeted at homes and pilot trials at a designated residential-business estate are expected to make Singapore the world’s first smart nation. At least 15 trials involving more than 20 partnering companies have been rolled out from the third quarter of 2014, and are expected to see more than 1,000 data sensors deployed in three main areas — urban mobility, sustainability and improving sensing and situational awareness.

Investment in alternative energy/clean technologyv

Singapore aims to develop the clean technology sector to contribute US$2.7 billion to Singapore’s GDP and provides 18,000 jobs by 2015. The Singapore Government has announced more than US$635 million of new public sector R&D funding for energy, water, green buildings and addressing land scarcity. Singapore has also set aside US$111.1 million for research in clean energy technologies under the banner of the Energy Innovation Programme Office (EIPO). The Singapore Government has also introduced Sustainable Singapore Blueprint (SSB) 2015, which aims to promote eco-smart towns and use of green technology. The Government has committed US$1.2 billion to support the roll out of programs and initiatives by various government agencies.

Strong demand for data centersvi

There is an increasing demand for data centers in Singapore due to growth in internet and mobile usage as well as cloud computing. Furthermore, close to 22% of data centers in Singapore are more than 10 years old and require replacements. The Infocomm Development Authority is building a data center park in collaboration with the Singapore Economic Development Board and JTC Corporation. The ESDM market is expected to grow in Singapore due to an increased demand for data centers, led by above stated factors.


2.4 Key players in India and Singapore ESDM value chain

ESDM value chain Indian market overview Singapore market overview

Integrated device manufacturers, fabless companies and third-party design companies — design and manufacturing

Key players:

IDM: AMD, Freescale, Infineon, Intel, NXP Semiconductors, STMicroelectronics, TI

Fabless: Broadcom, Marvell, Mediatek, Qualcomm, Xilinx,

Third party companies: eInfochips, Smartplay, Sasken, Tata Elxsi, Ittiam, Wipro

Key players:

IDM: AMD, Infineon, Intel, NXP, STMicroelectronics, TI, ams AG, Finisar, International Rectifier, Micron, Fujitsu, Hitachi, Linear Technology, Panasonic, Qorvo, SK Hynix

Fabless: Broadcom, Marvell, Mediatek, Qualcomm, Xilinx, Avago Technologies, eSilicon, FTDI, Lantiq, Lattice, Mandate Chips and Circuits, Maxim Integrated, RealTek, Silicon Laboratories

Semiconductor manufacturing

Key players:

Wafer fab: SCL

Government has approved setting up of two consortia fabs

Outsourced Semiconductor Assembly and Test (OSAT): SPEL Semiconductors, Tessolve

Key players:

Silicon foundry: GlobalFoundries, United Microelectronics Corporation (UMC), Systems on Silicon Manufacturing (SSMC), Siltronic AG, IQE

Outsourced Semiconductor Assembly and Test (OSAT): STATSChipPAC, UTAC, ASE, Ardentec, Amkor

Equipment manufacturing Key players:

Applied Materials, ASM Technologies, KLA Tencor, LAM Research

Key players:

Automated test equipment, probe cards: Advantest, FormFactor, Teradyne

Electronic test instruments: Keysight Technologies, Rohde & Schwarz

Wafer production, process control, yield management equipment: Applied Materials, ASML, Lam Research, KLA-Tencor, Disco Hi-Tec, Suss MicroTech, Tokyo Electron

Semiconductor assembly equipment: Kulicke & Soffa, Manufacturing Integration Technology (MIT)

Electronics Manufacturing Services (EMS)

Key players: Centum Electronics, Dixon Technologies, Flextronics, Jabil, Kaynes, Rangsons, SFO Technologies, Sanmina, Sahasra Electronics, SGS Tekniks

Key players: Celestica, Flextronics, Jabil, Venture Corp



Electronic design automation and IP

Key players: Cadence, Magma, Mentor Graphics, Synopsys

Key players: Cadence, Mentor Graphics, Plunify, Silicon Cloud International, Synopsys

Marketing and distribution Key players: Arrow Electronics, Avnet, Element 14, Tomen Electronics, Electronica, Ramakrishna Sales Corp, WPG

Key players: Arrow Electronics, Avnet, Ingram Micro, McCoy

Research Institutions Key institutes: BEL-CRL, CDAC, SCL

Key institutes: Institute for Microelectronics (IME), Institute for InfoComm Research (I2R), Singapore Institute of Manufacturing Technology (SIMTech)

IC Design Centre: VIRTUS (IC Design Centre of Excellence as part of Nanyang Technological University)

Academic institutions (relevant for the ESDM industry)

Key institutes: BMS, PESIT, RVCE, IISc, IITs, NITs

Key institutes:

National Universities: National University of Singapore (NUS), Nanyang Technological University (NTU), Singapore University of Technology & Design (SUTD), Singapore Institute of Technology (SIT)

Subsidiaries of international universities: TUM Asia/TUM Create (Technical University of Munich), SMART (Singapore MIT Alliance for Research & Technology)

Pre-employment training for students: Institute for Technical Education (ITE)

Polytechnics: Ngee Ann Polytechnic, Nanyang Polytechnic, Republic Polytechnic, Singapore Polytechnic, Temasek Polytechnic

System Integrators Key players: HCL Infosystems, TCS, Wipro Systems

Key players: Amesys, GridComm, Ultra Clean Technology

Training providers Key institutes: CDAC, Electronic Sector Skill Council of India (ESSCI), Telecom Sector Skills Council, NEILIT

Design school: RV VLSI, Sandeepani School of VLSI Design, Seer Academy

Key institutes: VLSI Consultancy, Spyro Technology, Singapore Semiconductor Industry Association, IEEE, Institution of Engineers in Singapore, EDA, equipment and system providers



Incubators and investors Incubation centers: DSI, Bangalore, Incubation Centres being set up at IIT Patna (Medical Electronics); Electropreneur Park being set up by STPI, Delhi University and IESA at DU

Key players: Get2Volume, Jafco Investment, NTU Ventures, NUS Enterprise, Red Dot, SmallWorldGroup

Government agencies and boards relevant for the ESDM industry

Key government bodies: Department of Electronics & IT (DeitY), (under Ministry of Communications and IT), IT & Electronics Departments of state governments, Industrial Development Corporations of states like IDCO, MIDC

Key government bodies:

Business development support: Singapore Economic Development Board (EDB), SPRING Singapore, International Enterprise Singapore (IES)

Research: National Research Foundation (NRF)

Learning and skill advancement: Singapore Workforce Development Agency (WDA), Employment and Employability Institute

Intellectual property: IPOS

Associations and organizations relevant for the ESDM industry

Key associations:

Industry associations: India Electronics & Semiconductor Association (IESA), Manufacturers’ Association for Information Technology (MAIT), Electronic Industries Association of India (ELCINA), Consumer Electronics and Appliances Manufacturers Association (CEAMA), Indian Cellular Association (ICA), Indian Printed Circuit Association, Indian Electrical & Electronics Manufacturers' Association, Telecom Equipment Manufacturers Association of India (TEMA)

Professional electronics engineering associations: Institution of Engineers in Singapore (IES), Institute of Electrical and Electronics Engineers (IEEE)

Key associations:

Industry associations: Singapore Semiconductor Industry Association (SSIA), SEMI, Association of Electronic Industries in Singapore (AEIS)

Professional electronics engineering associations: Institution of Engineers in Singapore (IES), Institute of Electrical and Electronics Engineers (IEEE)


Opportunities for cross-border alliances: India and Singapore


3. Opportunities for cross-border alliances: India and Singapore

3.1 Key propositions of Indian ecosystem 3.1.1 Demand-supply gap in domestic ESDM market Although India’s ESDM market is growing at a strong rate, most of the demand is met through imports. The total domestic ESDM market is expected to reach US$94.2 billion in 2015 from US$59 billion and US$75.6 billion in 2010 and 2013, respectively. However, domestic ESDM production and services lag far behind the demand, with revenues from domestic production and services estimated at US$32.7 billion in 2013 and forecasted to reach US$42.4 billion in 2015. This leaves a demand-supply gap of around US$52 billion that will have to be filled in 2015 and provide a significant opportunity to improve domestic manufacturing capabilities.

Going forward, the Government estimates that demand will increase to US$400 billion in the ESDM industry by 2020, while domestic ESDM production and services are expected to grow to around US$100 billion by 2020. Growing at this rate, the country’s electronic goods and component import bill would far exceed its oil import bill by 2020 and result in a major balance of payments crisis.

Figure 3: Demand-supply gap in the ESDM industry (US$ billion)

Source: IESA-F&S study, EY analysis

The Government is implementing various policies to develop the ESDM sector to prevent this situation. These initiatives are aimed at ensuring that the bulk of the demand is met through domestic production. This is likely to present significant opportunity for foreign and domestic players to set up manufacturing units in India to address its considerable market.

Section 3.1.2 discusses the Government’s initiatives to boost India’s ESDM sector.

59.0 64.6 68.3

75.6

94.2

25.2 27.6 29.8 32.7 42.4

2010 2011 2012 2013 2015 (F)

Total ESDM market Domestic production and services


3.1.2 Government initiatives to boost the ESDM sector in India The Government of India aims to transform the country from a consumption-driven market to one that has manufacturing capability to meet local and export-related demand while simultaneously focusing on producing high value add electronic products. The Government has launched several schemes to boost manufacturing of electronics in the country as well as create an entire electronics ecosystem.

Make in India initiativevii

The Government of India has launched the ”Make in India” campaign to attract businesses from around the world to invest and manufacture in India. The campaign aims to develop India as a manufacturing hub while eliminating redundant regulations and shortening bureaucratic processes. The initiative is expected to benefit the ESDM industry as significant investments are expected in the industry in the next two to three years.

National Policy on Electronics (NPE) 20122viii

The Government of India laid down the National Policy on Electronics (NPE) in 2012 with an aim to develop ESDM sector in the country. One of the important objectives of the NPE is to achieve a turnover of around US$400 billion by 2020 involving investment of around US$100 billion and employment to around 28 million people by 2020. This, in turn, includes achieving a turnover of US$55 billion in the chip design and embedded software industry and US$80 billion in exports in the sector. The policy also focuses on developing skilled talent for this sector as well as up scaling high-end human resource creation to 2,500 PhDs annually by 2020 in the sector.

With an aim to achieve the objectives highlighted in NPE 2012, the Government has launched several schemes and incentives to provide a favorable business environment for the ESDM sector to boom in the country. This section discusses these schemes in further detail.

Modified Special Incentive Package Scheme (M-SIPS)3ix

In July 2012, the Government approved a proposal to provide fiscal incentives as part of a special incentive package to promote large-scale manufacturing in the ESDM sector under its Modified Special Incentive Package Scheme (M-SIPS). The objective of the scheme is to remove impediments in manufacture of electronic products, e.g., the high cost of power and finance, high transactional costs and poor base of supply chain, and create a level-playing field for the development of an indigenous electronics-manufacturing eco-system in the country.

Key features of the scheme

Under the M-SIPS, the Government will provide incentives of up to US$1.6 billion during the Twelfth Five Year Plan period (2012–17).

These incentives will be available for 29 categories of products, including in the telecom, information technology hardware, consumer electronics, medical electronics, automotive electronics, strategic electronics, avionics, industrial electronics, nano-electronics, solar photovoltaic, semiconductor chip and chip component segments.

Units across the value chain, starting from raw materials (including assembly, testing, packaging and accessories of these categories of products) are included.

It also includes Electronics Manufacturing Services (EMS) units, which are engaged in providing services related to manufacture of sub-assemblies and parts as well as integration services to OEMs.

2 Link to NPE 2012: http://deity.gov.in/sites/upload_files/dit/files/NPE_Notification.pdf

3 Link M-SIPS scheme: http://deity.gov.in/esdm/incentive-schemes


Financial assistance from the Government

Type of unit Incentive in SEZ Incentive in non-SEZ

New unit in ESDM sector 20% of capital expenditure 25% of capital expenditure

Existing unit in ESDM sector expanding its capacity/modernization and diversification initiatives*

20% of additional fixed capital investment in plant and machinery

25% of additional fixed capital investment in plant and machinery

For the purpose of this scheme, capital expenditure will be treated as the total of capital expenditure in land (subject to a maximum of 2% of expenditure on total capital), building, plant and machinery and technology, including research and development.

The scheme provides for reimbursement of CVD/Excise duty on capital equipment for non-SEZ units.

Reimbursement of central taxes and duties for high technology and high capital investment units, such as fabs, is also provided in the scheme.

Incentives offered by state governments/agencies/local bodies will be over and above these.

Investment thresholds applicable for units are different, depending on the type and nature of products defined in the scheme.

Setting up semiconductor fabrication units4x

Semiconductor wafer fabrication units play a pivotal role in the overall ESDM ecosystem. Chip manufacturing creates its own upstream and downstream ecosystem and could kick-start a new wave of electronics hardware being manufactured in India. The Government intends to set up two semiconductor wafer fabs in the country. In September 2013, the Cabinet approved the establishment of two semiconductor fabs in the country. Two consortia have initiated work in this direction.

Electronic Manufacturing Cluster scheme5xi

In October 2012, the Government notified its Electronics Manufacturing Cluster (EMC) scheme to provide world-class infrastructure to attract investments in India’s ESDM sector. According to the scheme, the Government will offer financial support for implementation of EMCs that will help development of entrepreneurial ecosystem in the country, drive innovation and catalyze its economic growth by increasing employment opportunities and tax revenues.

Key features of the scheme

The Government would support a Special Purpose Vehicle (SPV), which should be a legal entity that is duly registered for this purpose. The SPV may be promoted by private companies, industry associations, financial institutions, R&D institutions, state or local governments or their agencies and units within the EMC.

The SPV will develop, operate and maintain infrastructure, amenities and other common facilities created in EMCs.

4 Link to notifications related to wafer fabs: http://deity.gov.in/esdm/semiconductor

5 Link to EMC scheme: http://deity.gov.in/esdm/itir


Financial assistance from the Government

The Government has decided to provide the following financial assistance to the SPV:

Greenfield EMC: A greenfield EMC refers to an undeveloped or underdeveloped geographical area, which is preferably contiguous. In this case, assistance is restricted to 50% of the project cost, subject to a ceiling of US$8.2 million for every 100 acres of land. A pro-rate ceiling will apply to a larger area. The remaining project cost will be financed by other stakeholders of EMCs contributing a minimum 25% of the project cost.

Brownfield EMC: A brownfield EMC refers to a geographical area where a significant number of existing ESDM units are located. In this case, assistance is restricted to 75% of the project cost, subject to a ceiling of US$8.2 million. The remaining project cost will be financed by other stakeholders of EMCs contributing a minimum 15% of the project cost.

Preferential Market Access (PMA) policy6xii

The Government of India has laid down a policy to give preference to domestically manufactured electronic products in Government procurement (applicable to all ministries/departments except Defence) for its own use, rather than for commercial re-sale. Each ministry/department will identify and notify all such electronic products for which preference will be given to domestic manufacturers. However, in the case of generic products that are procured across sectors, e.g., computers and communication equipment, notification will be communicated by the DeitY or DoT.

The notification issued by each ministry/department to communicate its preference for domestically manufactured products will specify the percentage of procurement to be made from domestic players, but it will be a minimum of 30% of the total procurement value of the electronic product. Furthermore, each ministry or department will specify the product’s domestic value addition-related requirement for it to qualify as a domestic product (subject to minimum requirements prescribed by the DeitY).

The definition of domestically manufactured electronic products requires that such products are manufactured by companies that are established and registered in India (including contract manufacturers but excluding traders). These products also need to meet the minimum defined graded domestic value addition (this varies across products) in terms of their Bill of Material.

Under this policy, DeitY has so far notified 10 items such as Desktop PCs, Dot Matrix Printers, Laptop PCs, Tablet PCs, Contact Smartcards, Contactless Smartcards, LED products, Biometric Access Control/Authentication Devices, Biometric Fingerprint Sensors and Biometric Iris Sensors for Government procurement, while DOT has notified 23 product categories.

Electronics Development Fund7

In December 2014, the Cabinet has approved the proposal to set up an Electronics Development Fund (EDF) to help in the creation of an ecosystem of innovation and R&D in ESDM industry. EDF is proposed to be set up as a “Fund of Funds” to participate in “Daughter Funds”, which in turn will provide risk capital to companies developing new technologies in the area of electronics, nano-electronics and IT.

EDF will support Daughter Funds including Early Stage Angel Funds and Venture Funds to promote domestic design capabilities, innovation, R&D and product development within the country in areas of ESDM, nano-electronics and IT. The Daughter Funds will create a resource pool of IP within specified areas and also support acquisition of foreign companies and technologies for products imported in India in large volume. EDF participation in Daugther Funds will be available across the ESDM value chain including fabless semiconductor start-ups, R&D, material, technologies required for electronic devices, design and manufacturing and product design.

EDF will typically take a minority stake in the Daughter Fund (except for products of strategic importance where there is no adequate commercial interest to participate) and the entire responsibility of raising the fund, investing and monitoring individual investments will be the responsibility of Fund Manager of the Daughter Fund.

6 Link to PMA policy: http://deity.gov.in/esdm/pma

7 Link to EDF policy: http://deity.gov.in/esdm/electronics-development-fund-edf-policy


Policies in various States for ESDM sectorxiii

In addition to the GoI, several state governments also have well defined policies in place to promote the ESDM sector within their respective states. These incentives are offered in addition to the incentives offered by the GoI. A sample list of states is provided below with a comparison across key incentives offered to the ESDM sector. A detailed listing of the incentives across states is covered in the Appendix section.

South and West regions North, Central and East regions

AP GUJ KA MH TN MP OD RAJ* UP WB

Capital subsidy

Interest subsidy

Training subsidy

Stamp duty waiver

Preferential market access

Plans for ESDM specific fund

Incentives for filing patents

CST exemption

Incentives for marketing activities

Power subsidies

Land/Office space at concessional rates

Electricity duty waiver

*Note 1: AP- Andhra Pradesh; ; GUJ: Gujarat; KA: Karnataka; MH: Maharashtra; TN: Tamil Nadu; MP: Madhya Pradesh; OD: Odisha; RAJ: Rajasthan; UP: Uttar Pradesh; WB: West Bengal *Note 2: Rajasthan eGovernance and IT/ITeS policy 2014 covered in this report is in draft stages and the incentives listed may undergo some changes in the final policy.


3.2 Key propositions of Singapore ecosystem Singapore provides an apt ecosystem for ESDM due to which the country is home to close to 40 IC design companies, 14 silicon wafer fabrication plants and 20 assembly and test companies.xiv Singapore also accounts for 1 out of 10 wafer starts (fresh wafers that are introduced into the fabrication sequence) in the world and manufactures 40% of the global hard disk media. Singapore provides a robust market for semiconductor manufacturing with its advanced infrastructure, skilled labor and business-friendly environment.

Manufacturing hub: The manufacturing sector forms the backbone of the Singapore economy, since it contributes close to 20% to the national Gross Domestic Product (GDP). Furthermore, the electronic industry forms a significant portion of the Singapore manufacturing sector and contributed 5.2% to the country’s GDP in 2012. In 2013, manufacturing output in the electronics sector reached US$64.1 billion, contributing 27.8% to Singapore’s manufacturing value-add. Singapore has end-to-end ESDM ecosystem with world's top 3 wafer foundries, top 3 hard disk drive manufacturers, 3 of the world’s top 5 outsourced semiconductor assembly and test companies, 15 of the world's top 25 fabless semiconductor companies, 11 of the world’s top 20 integrated device manufacturers and 6 of the world’s top 10 Electronics Manufacturing Services (EMS) providers.

Highly skilled talent pool: The ESDM industry calls for a skilled talent pool of IC designers, process development engineers, R&D engineers and test development engineers. Furthermore, the increasing need for small-sized, multi-functional and energy-efficient electronic devices, has led to growth in demand of high skilled labor. The Singapore Economic Development Board has developed a series of capability development programs and scholarships to attract and nurture a highly skilled ESDM talent pool. The country has more than 80,000 workers in this industry, with close to 1,300 IC designers out of which 44% are focused on analog, mixed signal and RF IC. xv Furthermore, with strong focus on engineering and science, Singapore has close to 12,000 engineering science graduates (25%–30% of total graduates) every year.

Availability of infrastructure: According to WEF’s Competitiveness Report for 2014–15, Singapore’s infrastructure ranks second among 144 countries with high class connectivity and electricity facilities. Furthermore, wafer fabrication facilities have stringent infrastructural requirements, such as low ambient vibration, ultra-clean air, good connectivity and a stable supply of electricity and water. Singapore hosts four wafer fab parks (Woodlands, Tampines, Pasir Ris and North Coast), spread over 260 hectares.

Conducive environment for innovation: As innovation is a key differentiating factor for high tech industries, Singapore has a strong focus on R&D. The Government has raised the R&D budget for 2011–15 by 20% from the previous period, 2006–10. Singapore has strong R&D capabilities and provides end-to-end semiconductor R&D capabilities from IC design and process enhancement to embedded software and systems development.

For protection of innovation, Singapore has stringent intellectual property protection mechanism (ranked second globally by WEF), which makes it easier for companies to invest in R&D. Singapore has also introduced a 10-year plan to position itself as the global intellectual property (IP) hub in Asia and has adopted measures such as introduction of intellectual property financing scheme and Center of Excellence for IP valuation.xvi

Investment friendly environment: According to US-based research institute, Business Environment Risk Intelligence (BERI), Singapore is expected to be the world’s most investor-friendly location in 2014–18, retaining its leadership position since 2009.xvii To attract investment from other countries, the Singapore Government provides tax incentives, depreciation schemes, favorable loan conditions and high-quality industrial estate. Due to its government efforts, the FDI inflow in Singapore increased by 4.3% to reach US$63.8 billion in 2013.xviii


3.2.1 Government initiatives to boost ESDM sector in Singapore The Singapore Government has introduced a wide range of programs to support the development of the ESDM industry. These programs include incentives for locally conducted R&D along with infrastructure and human resource development programs for high-end manufacturing. With an aim to make Singapore an attractive market for the sector, the government has adopted the strategy of encouraging innovation by developing R&D capabilities, training skilled labor and providing incentives.

Investment in human capital: The Singapore Government has introduced a comprehensive set of capability development schemes to address specific talent needs of the electronics industry. The Singapore Economic Development Board (EDB) has allocated US$16 million under Integrated Circuits Designs Post graduation Scholarship (ICPS), to encourage students to take up IC design at the post-graduation level in Nanyang Technology University (NTU) and National University of Singapore (MUS). It aims to benefit close to 150 students by the end of 2014. The Government also has Specialist Manpower Programme (SMP) IC design scholarship, which is provided in the final year of the IC design course. This scholarship is funded 70% by EDB and 30% by the industry.

In 2010, with the focus on power management and energy harvesting technologies, a new IC Design Center of Excellence named VIRTUS was formed through collaboration between the Agency for Science, Technology and Research (A*STAR), NTU and the industry. It aims to train at least 50 Masters of Engineering and 50 PhD post graduate students in analog and mixed signal designs.

Joint R&D laboratories: The Government of Singapore has co-invested with private companies in R&D laboratories to deepen the public-private research partnerships and encourage the industry to indulge in activities with increased value-add. As a result, value addition per semiconductor worker in Singapore has grown at a CAGR of 7.3% in the past five years, double the manufacturing industry average, to reach US$0.21 million per worker.

Institute of Microelectronics (IME), a research institute within the Singapore Government's A*STAR, and the private sector has come together to launch four joint semiconductor R&D laboratories focused on manufacturing small and more efficient semiconductors.xix The Government and industry partners are committed to inject US$158.7 million till 2017–19. The labs will leverage IME’s research capabilities in advanced lithography, metrology, assembly, and wafer level packaging. Other key research areas for IME include integrated circuit designs, advanced packaging, bioelectronics and medical devices, MEMS, nanoelectronics, and photonics.xx

Singapore also has Research Incentive Scheme for Companies (RISC) scheme, under which the Government of Singapore co-funds to support the set-up of R&D centers in strategic areas of technology. Supportable project costs include manpower cost (50% support), equipment and material (30% support), professional services (30% support) and intellectual property rights (30% support).

Tax incentive for manufacturing and services: Singapore offers a wide range of investment incentives for investors, including tax holidays and concessions along with one of the lowest corporate tax rates in the world. The tax incentives and grants offered in Singapore are generally in the form of exemption from tax or reduction in the rate of tax or subsidies. Under its Research and Development and Intellectual Property Management Hub program, Singapore grants a 5-year tax exemption on foreign-sourced royalties or income used for R&D in Singapore. Furthermore, the firms qualifying as “pioneer companies” may be exempted from income tax for up to 15 years, and thereafter likely to enjoy a reduced tax rate of 5% for another five years on incremental income under Development & Expansion Incentive (DEI).xxi

Incentives to encourage innovation: Singapore recognizes the importance of R&D, IP protection and training to promote innovation. The Government has provided many incentives to businesses to indulge in innovation.

Productivity and Innovation Credit (PIC) scheme: The Singapore Government has introduced the PIC scheme, to focus on promotion of long-term productivity-driven growth. Under this scheme, Singapore allows 400% tax deduction and 60% cash payout to businesses for investment in innovation and productivity improvements. The Government also introduced the PIC bonus to be given on top of the tax deduction and cash payouts. This incentive is aimed to accelerate investment in R&D, IP acquisition and employee training.xxii


The scheme was introduced during Budget 2010, and later enhanced in every year’s budget. It encourages businesses, especially SMEs, to invest in productivity and innovation activities. The scheme broadly covers spending on six business activities:

Training of employees

Purchase and leasing of PIC IT and automation equipment

Acquisition and in-licensing of IP

Registration of IP

R&D

Approved design project

The scheme provides following benefits to businesses:

400% tax deductions

Businesses can receive tax deduction of 400% (up to US$0.3 million) for their expenditure on each of the six qualifying activities. Below is the annual expenditure cap per activity:

Years Expenditure cap per qualifying activity Tax deduction per qualifying activity

2011 and 2012 (combined) US$0.6 million US$2.5 million (400% x US$0.6 million)

2013 to 2015 (combined) US$0.9 million US$3.8 million (400% x US$0.9 million)


Under the PIC+ scheme, SMEs that invest more than US$1 million in any of the six qualifying activities will get additional deduction for US$0.5 million of expenditure per year from 2015 to 2018. To avail this scheme, the SMEs should not have annual turnover of more than US$80 million and should not employ more than 200 workers.




60% cash payout

This option helps SMEs to convert their qualifying PIC expenditure into a cash payout to invest in technology or upgrade their operations. Under the scheme, the businesses have an option to convert up to US$0.08 million of expenditure into a cash payout. The maximum cash payout will be:


2011 and 2012 (combined) US$0.16 million US$0.05 million (30% x US$0.16 million)

2013 to 2015 (combined) US$0.08 million per year US$0.05 million per year (60% x US$0.08 million)

2016 to 2018 (combined) US$0.08 million per year US$0.05 million per year (60% x US$0.08 million)


PIC bonus

From years 2013 to 2015, businesses will get dollar-for-dollar matching cash bonus on top of the existing tax deductions and cash payout, subject to an overall cap of US$0.01 million. This bonus will help businesses defray rising operating costs such as wages and rentals.

By August 2014, more than US$1.4 billion has been granted to businesses in terms of tax savings and cash payouts. 36,000 companies (33% of active companies) were benefited from the PIC scheme in 2011. Later, this number grew to 45,500 (37% of active companies) in 2012 and 52,500 (40% of active companies) in 2013.xxiii

New Technology (INTECH): Under this scheme, the government of Singapore will co-fund to support the manpower development in the application of new technologies, industrial R&D and professional know-how. For company specific projects, trainees and trainers (50%-70% cost is supported which is subject to a maximum total grant of US$8,000 per trainer per month) cost is provided and for industry-wide projects equipment and building costs are supported (70% of the cost).xxiv

IP Valuelab: With an aim to enable companies to put IP at the core of their business strategy, the Singapore Government has launched IP initiatives and schemes to shorten the wait on IP applications. IP Valuelab, a subsidiary of the Intellectual Property Office of Singapore (IPOS), aims to help businesses with IP management, monetization and valuation issues in the country. The IP Valuelab is complemented by the Patent Search and Examination (S&E) unit that will halve the turnaround time for IP applications to six months. IPOS has also set up a new Patent Prosecution Highway (PPH) that aims to fast-track patent applications outside of ASEAN.xxv

Pro-business government policies: The factors leading to conducive environment for ESDM in Singapore include the pro-business government policies and incentives from various government entities such as EDB (Economic Development Board), SPRING, IE (International Enterprise) Singapore, IPOS (Intellectual Property Office of Singapore), WDA (Work Force Development Agency) etc. Some of the key schemes include:

EDB: EDB is a government agency for planning and executing strategies to enhance Singapore’s position as a global business center.

Development and Expansion Incentive (DEI): This incentive provides a reduced corporate tax rate on incremental income from qualifying activities. Factors of consideration also include the significance of the proposed investment to the development of industries in Singapore, contributions to the growth of research and development and innovation capabilities, as well as potential spin-off to the rest of the economy.

International/Regional Headquarters Award (IHQ/RHQ): Under this scheme Singapore provides a reduced corporate tax rate on incremental income and acts as an incentive tool to encourage companies to use Singapore as a base to conduct headquarters management activities to oversee, manage and control their regional and global operations and businesses.

Pioneer incentive: This incentive provides corporate tax exemption on income from qualifying activities. Factors of consideration also include the significance of the proposed investment to the development of industries in Singapore, contributions to the growth of research and development and innovation capabilities, as well as potential spin-off to the rest of the economy.

Land Intensification Allowance (LIA): The Government provides Land Intensification Allowance (LIA), which provides an initial tax allowance of 25% and annual tax allowance of 5% on qualifying capital expenditure incurred for the construction or renovation/extension of a qualifying building or structure.

Mergers & Acquisitions (M&A) Scheme: The M&A scheme provides an allowance of 5% of the value of acquisition, subject to a maximum of US$5 million for each year of assessment. It also provides deductibility of transaction costs and stamp duty relief. EDB's approval is required for the waiver of the condition that the ultimate holding company for the group must be incorporated and tax resident in Singapore.

Finance & Treasury Center (FTC) Tax incentive: This incentive provides a reduced corporate tax rate on fees, interest, dividends and gains from qualifying services and activities. It also provides a withholding tax exemption on interest payments on loans from banks and approved network companies for FTC activities.


SPRING: SPRING is an agency under the Ministry of Trade and Industry responsible for helping Singapore enterprises grow and build trust in Singapore products and services. As the enterprise development agency, SPRING works with partners to help enterprises in financing, capability and management development, technology and innovation, and access to markets. As the national standards and accreditation body, SPRING develops and promotes an internationally recognized standards and quality assurance infrastructure.

Center of Innovation for Electronics (COIE): Jointly established between SPRING and Nanyang Polytechnic (NYP), COIE is a national center to support companies in developing and exploiting innovations in products, systems, services and processes for growth. The Electronics COI is a one-stop center providing important services, from R&D to marketing, to business support and manpower development.

Programs for start-ups and start-up partners: These programs include Business Angel Scheme (BAS), Sector Specific Accelerator Program (SSA), SPRING Start-up Enterprise Development Scheme (SPRING SEEDS), Technology Enterprise Commercialization Scheme (TECS), Angel Investors Tax Deduction Scheme (AITD), and Incubator Development Program (IDP).

Programs for Enterprise Development: These programs include Vouchers (Innovation and Capability Voucher (ICV)), Tax incentive (Productivity and Innovation Credit (PIC)), Grant (Capability Development Grant (CDG)), Loan (Local Enterprise Finance Scheme (LEFS)), Loan insurance Scheme (LIS), Micro Loan Program (MLP).

Programs for industry: These programs include Local Enterprise and Development Program (LEAD), Customer Centric Imitative (CCI), Collaborative Industry Projects (CIP), Partnerships for Capability Transformations (PACT).

IE: IE Singapore is the government agency driving Singapore’s external economy. It aims to drive the overseas growth of Singapore-based companies and promote international trade. It provides various programs/incentives to local companies for venturing overseas. These include — Market Readiness Assistance, Global Company Partnership, Industry Partnership etc.

IPOS: IPOS is a statutory board under the Ministry of Law. IPOS advises and administers the Intellectual Property (IP) regime, promotes its usage and builds expertise to facilitate the development of Singapore’s IP eco-system. Key business decision-makers can utilize IPOS’ extensive resources to formulate and execute on strategies to help them effectively capitalize on their existing IP. These resources include — filing and registration services, funding and assistance, IP management, IP factsheets, IP financing scheme, IP consult, IP service providers, infopacks, hearings and mediation, IP Knowledge Kaleidoscope.

WDA: WDA aims to help workers advance in their careers and lives by developing and strengthening skills-based training for adults. It works with various partners, including employers, industry associations, the Union and training organizations, to develop relevant skills-based training that is accessible to all in the workforce, whether young or old, from rank-and-file to professionals and executives. Some of its programs include employee-based training funding, training courses for employees, Workforce Skills Qualification system (WSQ), identifying training pathways for employees, enhancing company’s productivity etc. Example includes Certificate Wafer Fabrication Engineer Certification with six specialized tracks – Process, Equipment, Integration, Facility, Quality and Production.


3.3 Identification of opportunity areas in both the countries

3.3.1 Strengths and weaknesses of Indian market India has a large ESDM industry, which is growing at twice the rate of the global electronics industry. This demonstrates the significant potential the industry holds. There are several advantages that the Indian ESDM industry offers, which can be leveraged by foreign players looking to enter the Indian market.

Strong semiconductor design ecosystem

The Indian semiconductor design sector is fairly developed, with more than 120 design units. Most of the top 25 semiconductor companies globally have their design centers in the country. The design industry primarily comprises three segments — embedded software, (VLSI) design and hardware/board design. Embedded software development contributes more than 80% of the segment’s revenues. The semiconductor design industry has gained considerable experience and is now moving up the value chain in terms of complexity of chip designs.

Stringent IP protection

The Government of India and Indian design companies have strict policies on IP protection as compared to other competing Asian countries. There have been instances when semiconductor companies have sent the work to India, even though design turnaround times are considerably high in the country, as compared to countries such as China, because of the more stringent IP protection measures in India.

Strong experienced and fresh talent pool

The most prominent advantage that India offers to the ESDM industry is the talent availability. The country has one of largest workforce size in the semiconductor design sector across the world, next only to the US and China. The workforce in the semiconductor design industry in India is estimated to be more than 250,000 in 2013, after it has grown at a CAGR of approximately 20% since 2009.

However, there are certain challenges that the Indian ESDM industry is facing. Although India’s ESDM market is growing at a robust rate, most of the demand is being met through imports, since manufacturing in the country is not adequate to meet the ESDM demand. Another challenge India faces is that the manufacturing of electronic products in the country is a low value addition, and is primarily focused on last mile assembly.

In the semiconductor sub-segment, India still does not have a presence of fabrication units. In addition, there are only a handful of ATMP units in the country, leading to an incomplete semiconductor ecosystem.

India also has a weak component ecosystem with low levels of component-manufacturing activity in the country and the absence of strong component distribution hubs that can import and trade components in large quantities. Although there is some manufacturing activity in the country, it is limited to a few parts of its component ecosystem (e.g., passives and PCB).

The ESDM industry holds a lot of promise; however, there still exist multiple challenges that are restricting the growth of the industry such as tax structure, infrastructure, supply chain and logistics and limited R&D focus. Therefore, while India boasts of an evolved semiconductor design industry and a strong talent pool, a complete ESDM ecosystem is not in place with several gap areas as highlighted in this section. This opens up several areas of opportunity for collaboration between Singapore and Indian ESDM sectors.


3.3.2 Strengths and weaknesses of Singapore market Singapore is a small, but wealthy country with an open and trade-driven economy. As Singapore is located at the convergence of the major east and west shipping lanes, it has become one of the preferred business locations for companies across the globe. The location advantage is further complimented by the Singapore Government’s pro-business economic and trade policies. Due to these advantages, Singapore has been recognized as top-three locations for foreign trade and investment in the Globalization Index 2012.

Furthermore, the Singapore Government has taken various pro-business measures including reduced corporate tax rates, lowered employers’ Central Provident Fund (CPF) contribution rates and capped office rental rates. According to Doing Business 2014 Report by the World Bank, the hassle-free administrative processes as well as quality of government policies have made Singapore the easiest place in the world to start, run and do business.

In terms of ESDM market, Singapore is an important hub for R&D of electronics products and electronics manufacturing services. Singapore’s electronics R&D capabilities range from component-level design and process R&D to system-level product design, firmware development and industrial design. The Government is aggressively promoting R&D activities with the introduction of centers such as the VIRTUS IC Design Center of Excellence and IME. With its strong focus on innovation, Singapore has also nurtured a robust IP regime and has been recognized for having the best IP protection in Asia.

Singapore owns close to 10% of worldwide wafer fabrication capacity.xxvi An integrated and efficient infrastructure (in terms of power, water, roads, etc.) has allowed Singapore to host four wafer fabrication parks and house close to 14 fabrication plants. The country also hosts 9 out of 10 global IC design companies and renowned outsourced semiconductor assembly and test companies.

Despite these major advantages, Singapore faces a few challenges as it aims to achieve growth in the ESDM market. Singapore has a very small domestic market, and hence, is majorly an export dependent market. However, the electronics sector, which accounts for one-third of Singapore's manufacturing exports, has now reported a decline for past straight seven quarters and shipments of electronic products have fallen 11% in first three quarters of 2014. Though, electronics is a key element of Singapore's exports, the sector has not been able to derive profits from growth in smartphones and other recreational tech products.

Apart from declining exports, the Singapore ESDM industry is facing constraint in terms of limited skilled resource pool and is majorly dependent on foreign labor. Singapore's Government has been working to reduce reliance on foreign labor as part of a push to increase the economy's productivity. Introduction of more stringent foreign manpower policies in 2012–13 has led to a tight labor market, putting upward pressure on wages. The tight labor market is also leading to labor crunch in Singapore. Due to this, the Singapore electronics industry may shrink significantly. According to data from EDB, in 2013, the electronics cluster provided 76,402 jobs. This is down from 81,950 jobs in 2010, which itself is down from 95,690 in 2005.

Due to its increased business cost, Singapore is facing stiff competition from reduced cost regions such as India, Malaysia, Hong Kong and Thailand. These nations are considered lowest-cost manufacturing competitors in the electronics industry and offer many low-cost suppliers of generic, low-technology components.

Bilateral trade between India and Singapore: current status and vision for 2025


4. Bilateral trade between India and Singapore: current status and vision for 2025

Singapore and India have traditionally shared a strong trade relationship. Singapore is the seventh-largest source of investment in India and is the country's largest trade and investment partner in ASEAN, since it accounted for 25% of FDI inflows in 2013–14.xxvii Economic and commercial ties have expanded significantly, particularly after the Comprehensive Economic Cooperation Agreement (CECA) was concluded in 2005. The India-Singapore CECA has four key components — a free trade agreement (FTA) in goods; an arrangement to boost trade in services; a package to promote investment flows and provide mutual investment protection; and a new agreement to avoid double taxation. Therefore, CECA eliminated tariff barriers, double taxation, duplicate regulations and increased collaboration between financial institutions of Singapore and India. The CECA has also enhanced bilateral collaboration related to education, science and technology, intellectual property and aviation. Indian companies are increasingly using Singapore to raise funds, particularly for global operations. This agreement has relaxed visa regulations for Indian professionals in information technology, medicine, engineering and financial services industries to emigrate and work in Singapore.

Since 2005, a healthy expansion in bilateral trade and investment has taken place between the two countries. The number of Indian companies with operations in Singapore jumped to 6,000 in 2014 from 1,100 in 2000. Bilateral trade has grown from US$8.8 billion in 2005–06 to US$19.3 billion in 2013–14. The exports from India were estimated at US$12.5 billion and India's imports from Singapore were US$6.7 billion in 2013–14. India’s main exports to Singapore include petroleum, gemstones, jewellery and machinery while India’s imports from Singapore include electronic goods, non-electrical machinery, organic chemicals, project goods, transport equipment, artificial resins and professional instruments (non-electronic).

Electronic items are India’s largest imports from Singapore as they account for close to one-third of total imports. Some of the leading electronic products imported by India from Singapore include photosensitive transistor diodes, electronic integrated circuits, mobile phones, laser and magnetic discs, optical fiber cables, fixed capacitors, digital cameras, smart cards, video recorders and parts for line telephone apparatus.xxviii

The electronics import from Singapore to India has increased from US$1 billion in 2004–05 to close to US$2.7 billion in 2013–14. With the interventions of governments of the two countries to boost the ESDM trade, as well as strong collaboration at the industry level, there is a strong potential for the growth of import/export of electronics across India and Singapore. These synergies could potentially lead to a CAGR of 14%* over the next 10 years for imports growth from Singapore to India, taking the trade to US$11.2 billion in 2024–25. Similarly the ESDM exports from India to Singapore can potentially increase from US$151.8 million in 2004–05 and US$500 million in 2013–14 to reach US$3.1 billion by 2024–25, growing at a CAGR of 18%*. This will, in turn, boost the overall bilateral trade between both the countries and lead to a strong economic relationship in future.

*Note: In the last 10 years, the import and export growth has been approximately 11% and 14% respectively (EY estimates); with the new government initiatives in both the countries and expected increase in synergies between both countries, there will an estimated 3%-4% increase in trade growth rates till 2025.

Recommendations for collaboration areas in ESDM sector


5. Recommendations for collaboration areas in ESDM sector

5.1 Business to business opportunities 5.1.1 Opportunity for Singapore companies to create support

ecosystem for setting up fabrication units in Indiaxxix With the GoI approving setting up of two wafer fabs in India, there will be a strong demand for wafer fab equipment and related facilities for the construction of fabrication units. This development provides a significant potential opportunity for wafer equipment and support ecosystem players based out of Singapore to help in the set-up of fabrication units in India.

5.1.2 Opportunity for Singapore companies to invest in ATMP units in Indiaxxx

Semiconductor manufacturing extends beyond wafer fabs to include Assembly, Test, Mark and Packaging facilities (ATMPs) as well. While semiconductor fabs are capital-intensive and have a long gestation period, ATMPs, on the other hand, require much reduced capex. India currently has a very limited presence of ATMP facilities. The third party design services companies and captives are dependent on ATMP facilities of other countries, which lead to increased costs and increased time to market. With the setting up of two fabrication units in India, the demand for ATMP will increase further in near future. Singapore has a strong presence of ATMPs with approximately 20 ATMP units, and India will offer significant opportunity for Singapore-based ATMP players to set up ATMP facilities in the country.

5.1.3 Opportunity for Indian companies to help Singapore scale up design talent

India has a vast design resource pool as compared to Singapore. Singapore has close to 1,300 VLSI design engineers employed in the industry while in India this number is approximately 30,000. Due to high availability of talent pool experienced in IC design in India, the Singapore companies can outsource their design processes to Indian companies. Apart from VLSI design, Singapore can also leverage embedded software and power management talent pool from India. This can provide Singapore companies a significant expansion opportunity. By outsourcing to India, Singaporean companies can scale up their design operations rapidly.

5.1.4 Opportunity for Singaporean companies to invest in electronic component ecosystem of India

The Indian Government is aggressively promoting the ”Make in India” campaign. Under this initiative, the Government aims to encourage foreign electronics and high-tech companies to invest and establish operations in India. Through this, the Indian ESDM sector is expecting to receive significant amount of investment over the next two to three years as the rising demand for electronic goods such as mobile phones, tablets and cameras has spurred interest from foreign firms to set-up a manufacturing base to cater to India’s domestic demandxxxi. Furthermore, backed by India’s national manufacturing policy, the manufacturing sector’s share of GDP is expected to increase from 16% in 2014, to 25% by 2022. Given such growth expectations, there can be considerable opportunity for Singaporean companies to manufacture and supply electronic components and industrial machinery to the flourishing manufacturing industry of India. Furthermore, as the Indian Government is providing incentives for implementation of EMCs in the country, Singaporean companies can invest and provide support to set up component warehouses in Indian EMCs.


5.1.5 Opportunity for Indian companies to set up operations in Singapore to explore emerging South East Asian markets

By setting up their operations in Singapore, the Indian companies can move closer to emerging economies of South East Asia. The Indian companies should set up their design centers and other operations in Singapore to relate more to these markets. By moving closer to South East Asian markets, Indian companies can better understand the demand scenario in these markets and quickly respond to their demands and trends. This way, Indian companies will be able to explore opportunities in other emerging markets, along with catering to the substantial domestic demand of India.

By setting up operations in Singapore, the Indian companies can also leverage on the proximity to local fabs and OSATs for their semiconductor components. Local offices can help foster more business confidence for design outsourcing entities.

5.1.6 Opportunity for Singaporean companies to explore India as a low-cost location

With limited number of skilled labor and stiff competition from low-cost neighboring countries, it is essential for Singapore ESDM companies to move up the value chain and attract high end, value-added manufacturing by shifting labor-intensive operations to low-cost locations. Furthermore, as Singapore has limited domestic demand, the companies can invest in nearby developing countries such as India to obtain market access. Singapore should explore India as a low-cost location and invest in setting up operations in the country. By working in partnership with India, Singapore ESDM players may continue to expand their operations and ensure Singapore’s competitive edge as world-class electronic manufacturing market.


5.2 Government-to-government opportunities 5.2.1 Joint fund for R&D A major characteristic of the ESDM sector is the importance of R&D and innovation due to velocity of technology change. As the half-life of technologies has been continuously reducing, it is important to focus on innovation. Governments of India and Singapore should come together to seek proposals for joint applied R&D projects and other actions meant to generate new or expanded R&D-based partnerships between the two nations. Department of Electronics and Information Technology (DeitY), Government of India and A*STAR, Singapore should set up a joint fund and invite Indian and Singapore companies, researchers and academic institutes to submit proposals for joint research projects in the area of ESDM. Through this partnership, the Indian innovation ecosystem can be strengthened by leveraging the expertise from Singapore. Under this partnership, the Indian companies can source high-end technology from Singapore to innovate. While Singapore can expand scales of innovation and reduce operational costs by investing in the joint R&D ecosystem.

India and Singapore already have strong relationship in the R&D space as under the framework of the Programme of Cooperation in Science & Technology, Indian and Singaporean governments fund joint projects of R&D in “Advanced Materials & Energy”. Under this framework, the research projects are funded for a maximum of three years. The funding covers the expenses related to research, exchange visits and institutional overhead. Similar joint R&D initiative can be taken in ESDM space to ensure growth of innovation in both the countries.xxxii

5.2.2 Partnership between Sector Skill Council for standardization in skill development

In India, there is a huge demand for skilled workforce and has a great potential in terms of number of graduates every year, but they lack advanced competency level and skill sets, which adversely affect efficiency, productivity and delivery of goods and services.xxxiii

On the other hand, Singapore has a limited resource pool but has various skill development schemes to develop a comprehensive set of capability to meet the electronics industry's talent needs. Nanyang Technological University, National University of Singapore and Singapore University of Technology and Design, Institute of Microelectronics (IME) and VIRTUS, Singapore’s IC Design Center of Excellence are dedicated to develop high skilled labor for ESDM industry.

Indian and Singaporean Government should come together to establish a partnership between Sector Skill Councils of both the countries and introduce standardization in skill development for ESDM industry. As a part of partnership, Singapore can set up centers of skill development in India. Through this partnership, the quantity, i.e., number of engineering graduates, of India and quality of Singapore can come together to provide a large pool of highly skilled labor for both the countries.

Singapore has already setup, the World Class Skill Development Center in Delhi, which acts as a national center of excellence for skill development in the fields of manufacturing, health care, medicine and construction. The Institute of Technical Education, Singapore, has experience of setting up of such institutes in more than 10 countries apart from conducing training workshops.xxxiv Similar skill development institutes can be replicated across the country to attain an increased number of resource pools in India.


5.2.3 Collaboration for implementing standards in area of electronics design, manufacturing and testing

It is important to create a common mechanism to develop and mandate standards and certification for electronic products and services to strengthen quality assessment infrastructure. Through the collaboration between India and Singapore to develop a set of standards that are acceptable to both the countries for electronic design, manufacturing and testing, the entry in each other’s markets will become easier. Under this partnership, certification by an agency of one country will be accepted by the other and hence, will lead to cost reduction as well as faster and easier access for companies wanting to tap the market. Furthermore, the removal of duplicate testing will open a wide market for manufacturers. Both countries can complement each other’s ESDM industry, by creating same set of standards, since one has high demand but low supply while the other has low domestic demand but abundant supply of electronic products.

The Indian and Singaporean governments have a similar agreement in the space of telecom equipment testing. The Infocomm Development Authority (IDA) of Singapore and the Telecom Engineering Center (TEC) of India have agreed to abolish the need for testing and certification in both countries. This means that once products made in India are certified by the TEC, the IDA will not have to certify that the items adhere to Singapore standards and regulations. The agreement is expected to provide a major boost to the telecom manufacturing sector in India as locally made products will be acceptable in one of the highly developed electronics market.xxxv

Appendix


6. Appendix ESDM industry snapshot: India-Singapore

ESDM Industry India Singapore

Market size US$75.6 billion (2013) US$64.1 billion (2013)

Growth rate (2010–15) 9.9% 2010: 36%

2011: -13%

2012: -11%

2013: 3.5%

Presence of ESDM players 120 design units

2 proposed fabs

14 silicon wafer fabrication plants

20 assembly and test operations

40 IC design centers

Workforce (Includes direct and indirect workforce)

1.6 million 80,000 (2013)

ESDM Imports (2013–14)* US$2.7 billion from Singapore US$500 million from India

Projected ESDM Imports (2024–25)*

US$11.2 billion from Singapore

US$3.1 billion from India

*Note: In the last 10 years, the import and export growth has been approximately 11% and 14% respectively (EY estimates); with the new government initiatives in both the countries and expected increase in synergies between both countries, there will an estimated 3%-4% increase in trade growth rates till 2025.


Detailed Policies in various Indian States for ESDM sectorxxxvi

South and West regions

Andhra Pradesh Gujarat Karnataka Maharashtra Tamil Nadu

Capital subsidy

10% subsidy on capital equipment for technology upgrade

NA Capital subsidy up to US$0.82 million or 10% of the total investment (whichever is lower) and will be provided to first two anchor units in each greenfield EMC

NA Back-ended capital subsidy of US$0.05–0.37 million based on investment in fixed assets and number of persons employed; Manufacturing units located within SIPCOT Industrial parks in A & B districts will be provided an additional 50% capital subsidy over and above the eligible limit and those located within SIPCOT Industrial parks in B&C districts will be provided an additional capital subsidy of 10% and 25% respectively over and above the eligible limit

Interest subsidy

3% interest rebates limited to US$0.01 million for 5 years

5% for MSMEs and 2% for large industries (having an actual investment of up to US$0.02 billion), subject to a maximum of US$0.04 million and US$0.08 million per annum, respectively

Available to an extent of 5% to micro enterprises for a period of three to five years depending on location

NA NA

Training subsidy

50% reimbursement on cost involved in skills upgrade and training local manpower limited to US$33 per person

NA NA NA State Government to offer training subsidy on a case-to-case basis taking into account the capacity of employment generation and the potential for significant improvement of skills

Stamp duty waiver

100% reimbursement of stamp duty, transfer duty and registration fee paid on sale/lease deeds/mortgages/ hypothecations on the first transaction (50%

100% exemption of stamp duty and registration fee in lease/sale/transfer of land for the first transaction

Exemption on stamp duty to range between 0%–100% depending on location; Registration

Eligible units will be entitled for 75%–100% stamp duty exemption depending upon location in the state

50% exemption from the Stamp Duty and the Registration Fee




in case of second transaction)

charges for loan documents and sale deeds to be charged at a nominal rate of US$0.02 per US$16.5 transaction


The PMA policy of GoI shall be implemented in all state departments. Additional preference shall be given to AP-based domestic manufacturers.

Preference will be given to locally manufactured electronic products in the state for government procurement. The Science and Technology Department will publish detailed guidelines in this regard in due course.

PMA for procurement of electronic products by government departments manufactured by the companies registered and engaged in manufacturing in Karnataka. Value addition as % of BOM to increase from 25% in Year 1 to 45% in Year 5

NA NA

ESDM specific fund

Plans to set up a fund in collaboration with GoI to promote design, manufacturing, assembling and packaging businesses

Plans to infuse special funds in partnership with the industry and other academic institutions for promoting ESDM innovation and incubation

Plans to set up a fund in collaboration with GoI and other public/private financial institutions to provide money for start-ups, growth and debt/capital needs of semiconductor design companies

NA NA


Companies will be reimbursed 100% of the cost of filing patents subject to a maximum of US$0.01 million (per domestic patent) and US$0.02 million (per international patent).

Companies will be reimbursed up to 50% of actual filing costs subject to a maximum of US$0.02 million for domestic and US$0.04 million for international patents.

Companies will be reimbursed up to 50% of actual filing costs subject to a maximum of US$1,644.7 for domestic and US$0.01 million for international patents.

All MSME IT enterprises in the state shall be reimbursed 50% of the cost of filing patents subject to a maximum of US$0.01 million.

All manufacturing and stand-alone R&D units shall be reimbursed 50% of the cost of filing patents subject to a maximum of US$1,644.7.

CST exemption

100% tax reimbursement of VAT/CST or CGST, for new units started after the date of issue of the state policy, for a period of 5 years from the date of commencement of production for products made in AP and sold in AP

Reimbursement of net tax paid, will be limited to 90% of the Gross Fixed Capital Investment made by the eligible unit within one year (two years for Mega ESDM project) from the date of

Karnataka government to reimburse 95% of CST, till GST is implemented, paid by the eligible ESDM units during the first five years of their operations, for inter-state sales.

NA VAT+CST exemption based on investment and number of persons employed




production or during the operative period of the policy, whichever is earlier. For inter-state sales, CST paid into government treasury would be reimbursed, till GST is introduced.


Reimbursement of 50% exhibition subsidy for participating in national/international exhibitions

Assistance of 50% of expenditure to MSME units and Industry Associations for participation in international Trade Fairs outside India, subject to maximum US$3,289.5 million and US$0.02 million, respectively.

Reimbursement of 50% of the actual costs (subject to a maximum of US$0.02 million per year per company) for international marketing and promotion expenses

NA Industry associations will be offered a back-ended subsidy of 50% of the cost of land or US$0.16 million, whichever is less, for setting up international exhibition-cum-convention centers

Power subsidies

Subsidy of 10%–50% depending on location and type of unit (large/medium/small) for a period of 5 years from the date of commencement of operations subject to a maximum of US$0.08 million

Subsidized power tariff of US$0.02 per unit for a period of 5 years

NA Extent of US$0.01–0.02 per unit depending upon location (except area A and B)

NA


25% rebate in land cost limited to US$0.02 million in industrial estates, industrial parks, SEZs, hubs and clusters

NA NA Government to provide land at 25% of the prevailing rates for the IT units being set up in Maharashtra Industrial Development Corporation (MIDC) area in Low-HDI districts.

NA


100% exemption on Electricity duty for new electronic hardware units for a period of 5 year, after coming into commercial operations

100% exemption from the payment of electricity duty for a period of 5 years from start of operations.

100% exemption on electricity duty for three to four years depending on location

Eligible new units entitled to exemption from payment of electricity duty for 10 years.

Exemption of electricity tax for a period of two to five years based on investment in fixed assets and number of persons employed




Others 1. The state Government plans to develop Information Technology and Investment Region (ITIR) in Visakhapatnam. In the ITIR, the government plans to reserve two clusters to be solely developed as Electronics Hubs. Visakhapatnam is proposed to be developed as Mega Electronics Hub. 2. The State Government will also facilitate the setting up of the “state-of-the-art” Electronic Hardware Park in Kakinada as announced by the GoI. 3. A special incentive package would be provided to the Mega projects, involving a minimum investment of US$0.04 billion or creating an employment of more than 2,000 people within 5 years.

1. The Government shall grant special package of incentives for mega ESDM projects on a case-to-case basis. Mega projects will be defined on the basis of employment created (more than 500) and investment made (US$0.04 billion excluding the cost of land). 2. The Government will set up Technology acquisition fund for acquisition of appropriate technology to a group of at least 10 MSMEs for a specific product/platform to an extent of 50% grant subject to a maximum of US$0.16 million per technology including royalty payments for the first two years. 3. Assistance to R&D units, testing facilities and incubation centers will be provided to an extent of 60% of the project cost excluding land, subject to maximum of US$0.08 million

1. The Government will support development of seven EMCs in the state by 2020 by providing additional incentives on top of those offered by GoI. 2. Interest free loan against the eligible gross VAT for sales within Karnataka

1. Industrial promotion subsidy payable is calculated at the rate of 60% to 100% of VAT on local sales + CST payable + 0% to 100% of ITC payable on finished products

1. In order to encourage new investments in the new and existing SIPCOT Industrial Parks in southern districts, the state government has announced a special package of incentives including allotment of lands at subsidised rate, stamp duty concessions, additional capital subsidy and special fiscal incentives


North, Central and East regions

Madhya Pradesh Odisha Rajasthan* Uttar Pradesh West Bengal

Capital subsidy

New IT units having fixed capital investment of US$1.64 million will be given special One Time Capital Subsidy of 25% subject to a maximum limit of US$0.04 million.

Capital subsidy of 20% for investment in plant and machinery (excluding land) subject to a maximum limit of US$0.08 million for IT/ITeS units and US$0.8 million for ESDM units

Capital subsidy of 25% on capex investment over and above the GoI MSIPS scheme limited to US$1.64 million per ESDM unit Assistance of 25% of the project cost to EMC SPVs in the Greenfield, subject to a maximum of US$3.3 million

15% on fixed capital (excluding land) subject to maximum of US$0.82 million. This subsidy shall be provided to first 10 companies on the basis of their date of commencement of commercial operations

12%–15% of the fixed capital investment depending on location; subject to a maximum of US$0.74 million payable in 5 equal yearly instalments

Interest subsidy

5% interest subsidy to all new eligible IT units making an investment of up to US$1.64 million, subject to a maximum limit of US$0.01 million per year and US$0.04 million for a period of 7 years

Available to an extent of 5% per annum for MSMEs, subject to a maximum of US$0.02 million for micro enterprises and US$0.03 million for small enterprises

7% interest subsidy on working capital loan for a period of 7 years

New IT units will be reimbursed the amount of interest at the rate of 5% payable on loan subject to a maximum of US$0.16 million for period of 7 years

25% of annual liability on term loan borrowed for an approved project and US$329 or one month salary, whichever is lower, to a maximum 750–1,000 candidates subject to a ceiling of US$0.25–0.33 million per year for five years depending on location

Training subsidy

One time reimbursement up to 50% of the cost incurred (subject to maximum of US$164.5 per employee) to the companies for providing skill gap trainings to the engineers that are domicile of Madhya Pradesh and are trained by the company within first two years of commencement of operations

NA One time training subsidy of up to 75% of the cost incurred on providing skill gap training to employees

NA 25% of annual liability on term loan borrowed for an approved project and US$329 or one month salary, whichever is lower, to maximum 750–1,000 candidates subject to a ceiling of US$0.25–0.33 million per year for five years depending on location

Stamp duty waiver

Exemption of stamp duty and registration fee for purchase/lease of space in IT investment area and stamp duty on mortgage/ hypothecation with financial institutions

100% exemption in stamp duty and registration fee on space allotted by government, IDCO and other government agencies

100% exemption in stamp duty and registration fee on purchase/lease of land or office space

100% exemption of stamp duty for purchase of land for setting up EMCs within the state

100% refund of stamp duty and registration fee for purchase of land and building for setting up the project





NA All e-Governance/ government projects with financial outlay not exceeding US$0.2 million will be awarded through local competitive bidding. Local participation and collaborative arrangements (subject to a maximum of 25% for deployment and maintenance components) for implementation with local enterprises is mandatory in projects with a financial outlay exceeding US$0.8 million

Value-added market access in government procurements for ESDM units manufacturing in Rajasthan Rajasthan-based IT/ITeS units shall be given 15% price preference in government purchases.

NA Government is considering a review of existing procurement policies in the state, so as to give a preference to local manufacturers in its procurement of hardware

ESDM specific fund

NA Plans to set up a Special Purpose Vehicle (SPV) in partnership with OCAC, Government PSUs or financial institutions for administering Venture Capital fund for IT/ITeS/ESDM startups

Plans to set up ESDM development fund and invest in ESDM start-ups

NA NA


NA Reimbursement of up to 75% of actual filing costs subject to a maximum of US$3,300 for R&D and software development IT units

Reimbursement of up to 75% of patent filing costs

MSME units shall be provided reimbursement of up to 50% of actual patent filing costs to a maximum of US$1,644.7 for domestic and US$0.01 million for international patents.

MSME IT units shall be reimbursed 50% of the cost of filing patents subject to a maximum of US$0.01 million per year

CST exemption

All new IT units shall be entitled for Investment Promotion Assistance after adjusting the tax rebate on the amount of VAT and CST (excluding the VAT on purchase of raw materials) deposited by the IT units. The rebate and period assistance will be

75% reimbursement of net VAT paid for a period of 5 years from the date of production for new IT/ITeS/ESDM units. Existing industrial unit taking up expansion will be eligible for reimbursement of net VAT paid for a period of 5 years

100% reimbursement of VAT for a period of 10 years, subject to a maximum of 200% of capital investment. 100% refund of CST until the abolition of CST or 5 years, whichever is earlier

100% tax reimbursement on VAT/CST subject to a maximum of 100% of fixed capital investment (excluding land) for a period of 10 years

100% refund of CST until the abolition of CST or 5 years, whichever is earlier




decided on the capital investment of the IT units.

on increased commercial production.


50% subsidy on stall rentals for participating in designated national, international exhibitions and events subject to a maximum limit of US$3,289.5 and US$1,644.7 million for international and national events, respectively

Subsidy of 50%–100% depending on minimum number of employees and maximum space available.

75% reimbursement of actual cost on international marketing and promotional activities (subject to a maximum of US$0.02 million per year per ESDM unit

NA NA

Power subsidies

NA NA NA NA NA


Land will be made available by the government at the rate of 25% of the prevalent Collector guideline rate. Area allotted to be decided on the basis of project cost.

NA 40% rebate on land cost, subject to a maximum of US$0.33 million and 25% subsidy on lease, subject to a maximum of US$0.01 million per year for 5 years

The land will be made available at the rebate of 25% on the prevailing sector rates on purchase of land from state agencies.

NA


NA 100% exemption from the payment of electricity duty and electrical inspection fees.

100% exemption from the payment of electricity duty

NA Complete waiver for a period of five to seven years depending upon location

Others 1. Electronics hardware manufacturing units shall be exempted for the payment of Entry tax for a period of 5 years. 2. Assistance and incentives to private sector for the establishment and development of industrial and high-tech parks

1. One time Recruitment Assistance in the range between US$115.1 and US$164.5 per employee (subject to a maximum of US$0.02 million per unit) shall be offered for net addition between 10% and 20%, subject to minimum 20 professionals in executive level to IT/ITeS/ ESDM units 2. New MSMEs in IT/ITeS/ESDM sector shall be exempted for the payment of Entry tax on acquisition of machinery and

1. The state government will form an ESDM specific nodal agency headed by Secretary Industries, for promotion of investment in ESDM sector in the state. 2. Facilitate setting up of at least four greenfield and two brownfield EMCs in the state; Special Incentive Package for 2 anchor units in each of the greenfield EMCs 3. Facilitate setting up of semiconductor wafer fab facilities 4. Create start-up

1. The state government will provide subsidy equivalent to 50% of the grant provided by the Central Government under National Policy on Electronics, 2012, for developing infrastructure facilities (roads, power, and water, testing facilities). This subsidy shall be applicable for first three EMCs in the state. 2. For existing units, the state government will provide industrial promotion subsidy equivalent to 50% of the incentives

1. In case of mega projects, the government may consider granting special package of incentives. 2. Government to provide suitable land sites and building of necessary infra for fabs. 3. Govt. to develop 15 clusters for SME units in cities such as Kolkata, Falta, Kharagpur etc.




equipment for a period of 3 years and on purchase/receipt of raw materials for a period of 5 years. 3. Local enterprises — IT/ITeS/ESDM units having their registered office in Odisha and recruiting at least 50% of their executive employees who are domicile of Odisha, will be entitled to a purchase /procurement preference as decided by government for IT solutions. These units will also be allowed to participate in tender in joint venture/consortium form.

ecosystem through ESDM CoEs, incubation centers and characterisation lab at universities 5. Addition of a target of 1000 trained students for ESDM sector to the 12th five year plan targets of Rajasthan state employment program 6. Mandatory 6 month to 1 year internship for students of Bachelor’s and Master’s courses related to ESDM; 50% reimbursement of cost of internship to ESDM units

applicable for new units (setting up in EMCs), if additional capital investment for capacity expansion is made in a period of 3 years. This subsidy will be applicable for first 10 units on the basis of their date of commencement of commercial operation. 3. ESDM and Fab units projects with a capital investment exceeding US$0.03 billion shall be considered for special incentives.

*Note: Rajasthan eGovernance & IT/ITeS policy 2014 covered in this report is in draft stages and the incentives listed may undergo some changes in the final policy.

References


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“A Guide on Singapore’s Productivity and Innovation Credit (PIC) Scheme,” Singapore Company Incorporation website, http://www.singaporecompanyincorporation.sg/how-to/taxation/a-guide-on-singapores-productivity-and-innovation-credit-pic-scheme/, accessed on 10 December 2014 xxiv “Apply for the Initiatives in New Technologies (INTECH) Scheme,” SMEcentre website, http://www.smecentre-sicci.sg/Biz/Bulletin%2054-Initiatives%20in%20New%20Techonologies%20Scheme.pdf, accessed on 21 November 2014 xxv “New initiatives could halve turnaround time for IP applications,” Channel NewsAsia website, http://www.channelnewsasia.com/news/business/singapore/new-initiatives-could/1330598.html, accessed on 21 November 2014 xxvi “Singapore – Manufacturing & Engineering Industry,” Singapore-German Chamber of Industry and Commerce, December 2013

“Singapore’s Semiconductor Landscape,” Singapore Semiconductor Industry Association Singapore, December 2014 xxvii “India - Singapore Relations,” High Commission of India website, https://www.hcisingapore.gov.in/pages.php?id=68, accessed on 4 December 2014 xxviii “INDIA-SINGAPORE TRADE RELATIONS,” ISAS Working Paper, 16 June 2008 xxix “Complex Equipment Supplier Guide,” EDB website, accessed on 26 November 2014 xxx “Careers@Singapore Electronics,” Singapore Electronics website, http://www.contactsingapore.sg/Library/1/Pages/301/CS_electronics%20industry_Factsheet_March%202012.pdf, accessed on 30 November 2014; xxxi “Electronics sector to get Rs 5,000 crore investments in 2 to 3 years,” Economic Times website, http://articles.economictimes.indiatimes.com/2014-10-20/news/55236877_1_msips-domestic-and-global-investments-esdm, accessed on 26 November 2014


xxxii “CALL FOR JOINT PROJECT PROPOSALS 2013,” Astar website, http://www.a-star.edu.sg/Research/Funding-Opportunities/Grants-Sponsorship/Bilateral-Joint-Research-Grant-Calls-International/Singapore-India-Joint-Grant-Call.aspx, accessed on 26 November 2014 xxxiii “Electronics Sector Skills Council,” NSCS India website, http://nscsindia.org/ExploreSectorSkillCouncilDetail.aspx?SSC=MTM=, accessed on 26 November 2014 xxxiv “World-class skill center planned,” The Times of India website, http://timesofindia.indiatimes.com/city/delhi/World-class-skill-centre-planned/articleshow/14073872.cms, accessed on 26 November 2014 xxxv “India - Singapore agree common testing standards,” Developing Telecom, http://www.developingtelecoms.com/business/regulation/875-india-singapore-agree-common-testing-standards.html, accessed on 26 November 2014 xxxvi Respective state government ESDM/ICT policies

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