After providing subsidies of about $10 billion under its ambitious semiconductor manufacturing promotion policy, the central government has prepared a blueprint for the second phase of the scheme. The government may increase the outlay of this program to $15 billion. This may include providing capital assistance for raw materials and gases used in chip manufacturing and reducing subsidies for assembly and testing plants.
A senior government official, requesting anonymity, told The Indian Express, “In a short time, we managed to clear four chip proposals, including a fabrication plant. The $10 billion outlay of the original incentive policy will almost be exhausted after subsidy payments are made to entities setting up these facilities. We want to attract more such plants. Given that many countries are trying to attract chip manufacturing, we have estimated that the new 2.0 scheme should have a higher outlay of $15 billion so that we can remain competitive.”
The objective of India
India has ambitions of becoming a major chip hub on the lines of the US, Taiwan and South Korea and is wooing foreign companies to set up operations in the country. So far, India has approved an $11 billion fabrication plant being built by Tata Electronics in partnership with Taiwan’s Powerchip, besides three more chip assembly plants by Murugappa Group’s CG Power in partnership with Tata, US Micron Technology and Japan’s Renesas.
Also read: Video: IT Minister gave a ‘masterclass’ on semiconductors on the whiteboard, explained how the entire ecosystem will be prepared
In an internal note prepared with estimates for revamping the scheme, the government has also decided to reduce the capital expenditure subsidy for assembly and testing plants (ATMP/OSAT) from 50 per cent (existing) to 30 per cent for conventional packaging technologies and 40 per cent for advanced packaging technologies.
The government had made the incentive policy in 2021
In the first version of the incentive policy released in December 2021, the Centre had offered a 30 per cent capital expenditure subsidy for chip packaging and testing plants. However, in September 2022, it increased the subsidy for such plants to 50 per cent. Micron Technology is understood to have spearheaded the proposal as the government wanted to facilitate the company to set up an assembly plant in India, which was eventually approved in June 2023.
Now, though the government wants to go back to its earlier subsidy contribution, there is a growing perception in some sections of the administration that it has overspent on packaging and assembly plants. In Micron’s case, for instance, about 70 per cent of its $2.7 billion plant will be paid for through subsidies provided by the central government and the Gujarat government.
what is the new plan
It is being said that the government also does not want to support technology transfer costs under the new incentive scheme. This means that companies that partner with others to use their chip manufacturing technology may have to pay out of their own pockets.
Also read: India will become a hub of chip industry, PM Modi laid the foundation stone of 3 semiconductor plants, said- ‘This sector is the gateway to development’
Under the new scheme, the government can also provide capital equipment and ecosystem support such as gases, chemicals and raw materials required in assembly and testing plants. Apart from this, the government can also consider encouraging the manufacturing of micro-LED displays.
It has also been revealed that Micron Technology’s ATMP plant in Sanand, Gujarat is running 133 days behind schedule as the company has not been able to hire enough manufacturing workers. Tata has demanded that PSMC should be given the necessary exemption to demonstrate the ability to manufacture 28 nanometer chips to provide financial support for the node. The government is considering the company’s request, but has not yet reached any conclusion.
Source (PTI) (NDTV) (HINDUSTANTIMES)