Govt to extend window for applications to chip scheme

Industry Outlook Team | Friday, 18 February 2022

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India will extend the window for applications to its ambitious incentive-backed semiconductor chip design and manufacturing scheme, Rajeev Chandrasekhar, minister of state for electronics and IT,said. The move is targeted at enabling a slew of top global semiconductor majors to also submit their proposals.

Officials say that the government has been in talks with industry heavyweights such as Intel, Samsung, GlobalFoundries and the Taiwan Semiconductor Manufacturing Company (TSMC) to apply for the scheme and invest in India.

“There is no deadline as such. Conversations with many global leaders are ongoing and so extending the date is certain," said Chandrasekhar. "The government understands that this is a very time-intensive decision and made more so due to travel and physical meeting restrictions (due to the pandemic),” he added.

The Centre’s move comes in the wake of top-level discussions with the world’s five largest chip manufacturers. According to officials, these firms have displayed significant interest in the $10 billion incentive package aimed at creating a comprehensive ecosystem for semiconductor chip design, packaging and manufacturing in the country. The scheme was announced last December and the government began accepting proposals from January 1, 2022.

So far, only a handful of proposals have been submitted under the chip manufacturing incentive scheme, none from the big players.

Officials aware of the matter said the government

is cognisant of the fact that companies may need more time to submit formal applications given the scale of the commitment. Typically, a semiconductor chip-making plant requires cumulative investment of between $3 billion and $5 billion. India is looking to approve proposals for establishment of at least two greenfield semiconductor fabs and two display fabs in the country.

Initially, the government had given applicants 45 days to submit applications while setting February 15 as the deadline for proposals under the silicon semiconductor fab manufacturing incentive scheme, which forms part of the overall semiconductor policy.

While unveiling the scheme, the government had said that it would provide up to 50% of project cost for two semiconductor and two display fabs in the country. Support under the scheme will be provided on pari-passu basis (a term denoting equal rights — for companies that are "found eligible") for a period of six years.

A spokesperson for Intel said that the company’s design centre in India is the largest outside of the US and it has been investing towards accelerating innovation and design engineering in the country over the last two decades. "However, we have no new plans to announce at this time," the spokesperson said.

So far, those who have submitted proposals include Abu-Dhabi based Next Orbit Ventures, which has pitched for a 65-nanometre fab at the cost of $3 billion and has tied up with Israeli technology firm Tower Semiconductor as its technology partner.

A day before the application window closed on February 15, Vedanta group and Hon Hai Technology Group (Foxconn) announced that they had entered into a pact to form a joint venture company that will manufacture semiconductors in India.

Earlier in December, the Vedanta Group had said that it will invest up to Rs 60,000 crore to set up a chip and glass manufacturing ecosystem in India over the next three years.

The company has also said that discussions are currently ongoing with a few state governments to finalise the location of the plant.

Meanwhile, analysts tracking the semiconductor industry are of the view that India must close the window for applications for silicon fab manufacturing and evaluate the proposals already submitted.

"Later if more of the eligible players are ready to apply in India, then the (Centre) can reopen the window," said Arun Mampazhy, who tracks the Indian semiconductor sector.