Policy support can propel semiconductor industry growth

The global semiconductor industry stands in a pretty decent and promising position today. 

Much of the credit of this success can be attributed to the proactive support and strategic interventions from governments around the world. Interestingly, a big chunk of this $600 billion dollar market is dominated by the Asia-Pacific. So, now is a good time for Bangladesh to learn from its neighbours. 

It is undeniable that technological progress will only create further demand for  integrated circuit (IC) chips, and the market is projected to double in value by the end of the decade, becoming a $1 trillion industry. 

This market deserves our serious attention for diversifying Bangladesh's economy in a more resilient and effective way to ensure sustained growth. Currently, our exploration in this industry revolves around the IC chip design part. But if we are able to enter the semiconductor ecosystem, which includes silicon wafer production, IC chip fabrication, IC chip packaging, assembly and testing, and integration into products as well, it's possible that Bangladesh's revenue from the semiconductor industry will be similar to the current revenue earned from the RMG sector. 

However, to let that happen, our government needs to fuel our semiconductor industry.

Bangladesh currently earns around $5 million annually from the semiconductor industry, mostly by providing IC design services. Whereas the RMG sector contributes about $40 billion annually — a boom that is evidently a result of several decades of careful nurturing from the government. 

Sectors like pharmaceuticals and active pharmaceutical ingredients, leather and leather goods, non-leather footwear, home textiles, and several others are also getting special attention from the government, and some have already crossed the billion-dollar mark regarding exports. If the semiconductor industry gets a similar policy focus, it will surely surpass the expressed ambition of the government — building a $10 billion semiconductor industry by 2031.

As mentioned above, some countries in the Asia-Pacific, including China, Taiwan, South Korea, Japan, Malaysia, Singapore, and our neighbour India are in relatively good positions in the market. The governments of these nations are investing heavily in this industry considering the massive demand leading China, Japan, Taiwan, and South Korea to be the 'Big 4' semiconductor players. 

Recently Vietnam has been able to attract multi-billion-dollar foreign direct investment (FDI) in semiconductor manufacturing. The Philippines and India are also reaping the benefits from this trend. 

India is already earning around $60 billion from the industry, and this is not by chance. The Indian government invested heavily in setting up IT-based universities to increase their skilled workforce and announced a $10 billion fund to strengthen the semiconductor industry in December 2021. These are the areas where we are also currently facing a shortage.

The Indian government also launched a programme called 'Semicon' to promote the production of semiconductors in the country. Under this programme, when setting up a semiconductor fabrication plant, the government extends fiscal support of up to 50% of the project cost to the approved applicants. 

Their current push to develop India into a semiconductor manufacturing hub through Production Linked Incentive (PLI) and Design Linked Incentive (DLI) schemes under the umbrella of the India Semiconductor Mission (ISM) seems like a step in the right direction. India's 55,000 design engineers now account for 20% of the global chip design talent pool. India is strong in design, opting for manufacturing, and already attracting major investments in the value chain.

In order to nurture our industry, the Bangladeshi government needs to take a similar stance. We can encourage local companies to start exploring IC chip packaging, assembly and testing. On the other hand, fabrication is highly sophisticated and needs a massive amount of capital and highly skilled engineers and researchers, which is not realistically feasible at this very moment. Although, with the aid of befitting policies, that too could very well become a reality in the future.

In the beginning, during the inception of ULKASEMI, it was very hard to make people understand that Bangladesh could design chips. But now the industry is already established. In order for it to grow, it now needs special attention, similar to how the RMG sector has been nurtured.  

The government of Bangladesh has played an active role in designing policy support to the RMG sector, which was crucial to its success. This includes back-to-back L/C, bonded warehouse, cash incentives, export credit guarantee scheme, tax holiday and related facilities. 

The RMG industry greatly benefits from reduced tax rates and other facilities. It experiences a lowered corporate income tax rate. The income tax rate for textile manufacturers is also reduced. 

These initiatives have helped Bangladesh remain competitive in RMG exports. The bold, timely and focused policy support extended by the government has also saved the RMG industry from the unprecedented impacts of the Covid-19 pandemic.

For sustained and inclusive growth of the semiconductor industry in Bangladesh, we will need that amount of policy focus, including friendlier skill migration policies, and, in the process, open up dialogues with other countries, such as Taiwan, South Korea, and Japan, for partnership opportunities, the exchange of knowledge and experience, and skilled workers.

The government has already set up multiple IT villages, IT incubators, and ICT parks in the country. These parks facilitate easy terms with tax holidays for investors. By leveraging these investments, undeniably, we can be headed in the right direction. The blueprint for success has already been laid out for us by our neighbouring countries, particularly India. If we provide the semiconductor industry with the necessary support, Bangladesh can potentially become a notable player in the market before 2031.

Mohammed Enayetur Rahman is the founder, CEO, and president of ULKASEMI.