Make Semiconductor Chips In India And Get Cash Incentive Worth USD 1 Billion

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India is apparently planning on offering more than 1 billion US Dollars to each semiconductor-based firm that sets up its manufacturing facility within the country. India has been chasing tech companies to set up a base in the country and start manufacturing products locally.

Semiconductors are typically silicon chips that perform control and memory functions in a wide range of products⁠ from computers and smartphones to cars and microwave ovens, to name a few. And there are very few of them, compared to the demand, since the pandemic. So much so that carmakers like Ford, Nissan, Volkswagen, Fiat Chrysler, and Toyota recently cut back production citing a shortage in semiconductors.

A senior government official told Reuters that the government, as well as private companies, will mandatorily procure ‘Made In India’ chips so that the new fabrication units have assured buyers of their product.

Intel (US), Samsung (South Korea), and TSMC (Taiwan) are the big three-chip manufacturers. While the former two can design, manufacture and sell chips from end to end, TSMC is the undisputed leader, in terms of sheer scale, sophistication and reach, accounting for more than half the total market share of foundry business.

Chips made locally will be designated as “trusted sources” and can be used in products ranging from CCTV cameras to 5G equipment, the first source said. But the sources did not say whether particular semiconductor companies have shown interest in setting up units in India.

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Earlier Attempts To Woo Chip-Makers Failed

In order for companies to set up fabrication plants in the country, top firms require top-of-the-line infrastructure, stable water supply, and support from the government. Previous attempts by India to bring semiconductor players here failed due to the lack of these requirements. However, it seems that the Indian government is now ready to offer everything a semiconductor company needs to set up fabrication plants. 

Moreover, Indian conglomerates, such as the Tata Group, have also expressed interest in moving into electronics and high-tech manufacturing.

“In order to facilitate investments and promote manufacturing in technology-intensive sectors, including semiconductors, the government of India has decided to constitute an empowered committee for manufacturing in high-technology areas,” the government said in its notification.

India in December invited an “expression of interest” from chipmakers for setting up fabrication units in the country or for the acquisition of such manufacturing units overseas by an Indian company or consortium.

The government estimates it would cost roughly $5-$7 billion to set up a chip fabrication unit in India and take 2-3 years after all the approvals are in place, one of the auto industry sources said. The source added that New Delhi is willing to offer companies concessions, including waivers on customs duty, research and development expenses, and interest-free loans.

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