Semiconductor manufacturing in India: Government offers 50 percent incentive for chip factories

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The union cabinet chaired by Prime Minister Narendra Modi on Wednesday approved a proposal to provide 50 percent financial incentives for manufacturing semiconductor factories across technology nodes, as well as compound semiconductors, packaging and other chip facilities.

The cabinet approved changes in the “Program for Development of Semiconductors and Display Manufacturing Ecosystem in India”.

As part of the modified program, a uniform tax incentive of 50 percent of the project costs across all technology nodes is to be provided for the construction of semiconductor factories.

Given the niche technology and nature of compound semiconductors and advanced packaging, the modified program is also intended to provide fiscal support of 50 percent of capital expenditures in pari passu mode for compound semiconductor/silicon photonics/sensors/discrete semiconductor fab establishments and ATMP/OSAT, according to a official statement dismissed after the cabinet meeting.

The program has attracted many global semiconductor companies to set up fabs in India. The modified program will accelerate investment in semiconductor and display manufacturing in India. Based on talks with potential investors, it is expected that work to set up the first semiconductor fab will start soon.

An advisory committee of global experts from industry and academia was formed to advise the India Semiconductor Mission – the node agency for the semiconductor development program and display manufacturing ecosystem in India.

The advisory committee unanimously recommended unified support for all technology nodes of silicon fabs/silicon photonics/sensors/discrete fabs and ATMP/OSAT, which was accepted by the government.

The technology nodes of 45nm and above have high demand driven by automotive, energy and telecom applications, among others. In addition, this segment accounts for about 50 percent of the total semiconductor market, the Electronics and IT Ministry said in the statement.




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