Nine months after announcing a Rs 76,000-crore incentive scheme for development of semiconductors and display manufacturing ecosystem in the country, the Union Cabinet on Wednesday sweetened it further by making the fiscal support of 50% of project cost uniform across all technology nodes for setting up of semiconductor fabs.
When the government had first announced the scheme in December 2021, it had extended financial support of up to 50% of project cost for at least two semiconductor and two display fabs for a minimum of six years. For others, like compound semiconductors, sensor fabs etc, fiscal support of 30% was to be offered.
Minister of state for IT Rajeev Chandrasekhar said the total outlay for the package will remain the same but harmonisation of incentives to 50% will make the semiconductor policy “extremely competitive” and attract investment across spectrum of opportunities, namely silicon and compound fabs, packaging units, display fabs, and design and innovation ecosystem.
Global companies, he said, are examining exploring India as a viable investment destination for semiconductors. India is positioning itself as among the most attractive destination in Asia for “all things electronics and semiconductors”, and the government is “confident” that investments of almost Rs 2 trillion will come in over the next two years.
“We believe this move will further increase the interest and create additional proposals that have been in discussions with us over the last 4-5 months,” Chandrasekhar told reporters.
Sources told FE that the modifications were sought by the ministry of electronics and IT after receiving industry feedback. Once the finance ministry approved the same, the matter was referred to the Cabinet.
Though the modification in the incentive scheme is timely, analysts said the big challenge for the government continues, which would be to ensure that the foundries – the epicentre for chip fabrication – which get set up are global in nature and are able to get global orders.
Ultimately, it’s the relocation of global units into the country, which would determine the success of the policy as any unit which is not assured of large-scale orders runs the risk of low capacity utilisation.
The minimum investment which goes into a foundry which is global in nature is to the tune of around $2-3 billion.
The timing of the modification of the incentive is apt. Vedanta Group, which has formed a joint venture with Taiwan’s Foxconn for setting up a semiconductor manufacturing unit in India under the scheme, has already announced an investment of Rs 1.54 trillion in the project. The company would be setting up the project in Gujarat and expects to break even in five years. The 60:40 joint venture will set up a semiconductor fab unit, a display fab unit, and a semiconductor assembling and testing unit on a 1000-acre land in the Ahmedabad district. Besides Vedanta, a consortium comprising Dubai-based NextOrbit and Israeli tech firm Tower Semiconductor, have also signed a deal with the Karnataka government for a plant in Mysuru. Singapore-based IGSS Venture has also evinced interest in such a project and has chosen Tamil Nadu as the location for its unit.