The government has created a plan for the second phase of the ambitious semiconductor manufacturing incentive policy, which could cost up to $15 billion and include capital support for raw materials and gases used in chip manufacturing as well as a reduction in subsidies for assembly and testing plants. This comes after nearly all of the $10 billion in subsidies under the program had been committed. The Indian Express has learnt of this development.
We expeditiously cleared four chip proposals, one of which involved a fabrication plant. The initial $10 billion incentive policy outlay will nearly be covered after the organisations establishing these facilities receive their subsidies.
A senior government official requested anonymity since the talks are currently private. “We want to attract more such plants, so we have pegged that the new 2.0 scheme should have a higher outlay of $15 billion so that we can remain competitive, given that many countries are trying to attract chip manufacturing,” the official said.
India has been luring international businesses to establish facilities there as it seeks to become a significant chip centre along the lines of the US, Taiwan, and South Korea. Thus far, the government has authorised the establishment of a $11 billion fabrication plant by Tata Electronics in collaboration with Powerchip of Taiwan, as well as three distinct chip assembly plants by the Tata Group, US-based Micron Technology, and Murugappa Group’s CG Power in collaboration with Renesas of Japan.
The government has also decided to lower the capital expenditure subsidy for assembly and testing plants (ATMP/OSAT) from the current 50% to 30% for conventional packaging technologies and 40% for advanced packaging technologies, according to an internal note created with the projections for the scheme’s renewal.
A thirty per cent capital expenditure subsidy for chip packaging and testing units was provided by the Centre in the initial version of the incentive scheme, which was unveiled in December 2021. Nonetheless, it raised the subsidy to 50% for these plants in September 2022. It is believed that the government took this action in advance of Micron Technology’s request, which was subsequently accepted in June 2023, in order to assist the business in setting up an assembly unit in India.
However, the government now wants to return to its previous subsidy contribution because some administration officials believe it has overspent on assembly plants and packaging. For example, Micron’s $2.7 billion factory will be financed in part by subsidies provided by the governments of Gujarat and the Central Government.
It is also known that the government does not wish to subsidise technology transfer expenses under the new incentive program. This implies that businesses that collaborate with others to use their technology for chip fabrication may have to pay for it themselves.
The government may also provide ecosystem support services, such as gases, chemicals, and raw materials required at testing and assembly facilities, as well as capital equipment under the new strategy. It could also consider providing incentives for the production of micro-LED screens.
Additionally, it has been discovered that the failure of Micron Technology to acquire a sufficient number of construction workers is the reason the company’s ATMP factory in Sanand, Gujarat, is operating 133 days behind schedule. The Tatas have requested an exemption from the need that PSMC to show that it is capable of producing 28 nanometre chips in order to continue providing financial assistance for the node. Though it hasn’t made a decision yet, the government is taking the company’s proposal into consideration.
