India clears Rs63,410 cr investment in two semiconductor chip units

The centre has approved the setting up of two semiconductor wafer fabrication (FAB) facilities in the country, involving total investment of Rs63,410 crore.

These FAB units are to be set up by two business consortia – one led by Jayprakash Associates and the other by HSMC Technologies India Pvt Ltd.

Jaiprakash Associates Limited will partner IBM and TowerJazz of Israel to invest Rs34,399 crore in a project to manufacture 90/65/45/28 nm chips, with an overall capacity of 40,000 WSPM. The project will be located along the Yamuna Expressway in Uttar Pradesh.

TowerJazz makes chips used in smartphones like Apple's iPhone and Samsung's Galaxy models as well as battery chargers and AC / DC adapters.

The second project, being set up by HSMC Technologies India Pvt Ltd with technology from ST Microelectronics and Silterra Malaysia Sdn Bhd, would involve an investment of Rs29,013 crore. 

The project, to be located in Prantij, Gujarat, will have a capacity to manufacture 40,000 WSPM of 90/65/45/28/22 nm size.

The letter of intent for the projects will be issued to the two consortia by 31 March 2014 and the final agreements are expected to be signed by August 2014.

An empowered committee of the union cabinet has been authorised to take all decisions to implement the FAB projects.

The proposed FABs will create direct employment of about 22,000 and indirect employment of about one lakh, according to an official release.

Besides, these FABs will have a big impact on the development of electronics system design and manufacturing eco-system across the country. This will help set up a critical pillar required to promote electronics system design and manufacturing in India (See: Govt seeks to boost electronics by subsidising chip units).

The semiconductor wafer fabrication units, when set up, will stimulate the flow of capital and technology, create employment opportunities, help higher value addition in the electronic products manufactured in India, reduce dependence on imports, and lead to innovation, the release stated.

The government proposes to provide a 25 per cent subsidy on capital expenditure and tax reimbursement as admissible under modified special incentive package scheme (M-SIPS) policy. The units will also be exempt from basic customs duty for non-covered capital items.

Semiconductor wafer units are also eligible for 200 per cent deduction on expenditure on R&D, besides investment-linked deductions and interest-free loan of approximately Rs5,124 crore each, (Exact amount of the loans will be calculated on the basis of detailed project report appraisal.)

India's demand for electronics products is forecast to rise nearly 10 times during this decade to reach $400 billion, or nearly Rs2,50,000, by 2020, necessitating increased imports that could far exceed the cost of oil imports.

The government also decided to appraise all other FAB manufacturers of the quantum of incentives being offered for establishing FAB facilities in India. Such manufacturers may be asked to indicate their interest and send their responses on specified parameters to the department of electronics and information technology (DeitY) within a period of four weeks.