India is gearing up to restart the application process for a $10 billion incentive program aimed at promoting domestic chip manufacturing in the country. This initiative is part of India’s push towards self-reliance in the technology sector and reducing its dependence on imports.
The government’s plan to resume the application process for chip manufacturing comes after it put the program on hold earlier this year due to overwhelming demand. The original announcement of the program in February had received an unprecedented response from global and domestic players.
The chip manufacturing incentive program aims to attract semiconductor companies to set up their manufacturing units in India. It offers cash incentives of up to 25% of capital expenditure for the establishment of new chip fabrication facilities, commonly known as fabs, or the expansion of existing ones. The program also offers reimbursement of various taxes and duties on imported machinery and equipment.
The government’s decision to resume the program is in line with its vision of making India a global hub for electronics manufacturing. The country is currently heavily dependent on imports for its electronics needs, and the government hopes that this program will help reduce the import bill while boosting local manufacturing.
According to industry experts, the program has the potential to attract billions of dollars in investments, create thousands of jobs, and bring advanced technology to the country. The incentives are expected to draw the attention of global semiconductor companies, especially those looking to diversify their supply chains and reduce their reliance on China.
The announcement of the program had initially received a positive response from companies for chip manufacturing such as Intel, Samsung, and TSMC, who had shown interest in setting up fabs in India. However, the overwhelming response led to the government putting the program on hold in April to evaluate the applications received.
The government is now set to restart the application process, and companies have been asked to submit their proposals by the end of July. The government has also announced some changes to the program to make it more attractive to investors.
One of the key changes is the removal of a clause that required companies to start manufacturing within two years of receiving the incentive. This clause was seen as a major deterrent for many companies, as setting up a fab is a capital-intensive process that takes time.
Another change is the addition of a new category of incentives for companies that invest in research and development (R&D) in India. This category offers cash incentives of up to 50% of R&D expenses incurred in India, with a maximum limit of $10 million per company per year.
The government has also clarified that the incentives will be available to both new and existing fabs, which is expected to encourage companies to expand their existing facilities in India.
Industry experts have welcomed the government’s decision to restart the program and the changes made to it. They believe that the removal of the two-year manufacturing clause and the addition of R&D incentives will make the program more attractive to companies.
However, they also caution that setting up fabs in India comes with its own set of challenges. One of the major challenges is the lack of a semiconductor ecosystem in the country, which includes the availability of skilled manpower, raw materials, and infrastructure.
To address these challenges, the government has also announced plans to set up semiconductor clusters in the country. These clusters will provide the necessary infrastructure, including power, water, and waste management facilities, to companies setting up fabs.
The government’s focus on promoting domestic chip manufacturing comes at a time when the global semiconductor industry is facing a severe shortage of chips. The shortage has been caused by a combination of factors, including the COVID-19 pandemic, supply chain disruptions, and increased demand for chips from various industries.
The shortage has led to increased prices of electronic products, delays in deliveries, and has affected industries such as automotive, consumer electronics, and telecommunications.
