Government to Offer up to 50% of Project Cost to Companies Setting Up Chip Plant

Following the announcement of the Rs 76,000-crore incentive scheme for semiconductors, the government has issued the detailed guidelines around it.

The government will provide up to 50% of the project cost to manufacturers looking to establish a facility to fabricate chips up to 28nm (nanometer), up to 40% of the cost for chips above 28nm and up to 45nm, and up to 30% for chips above 45nm and up to 65nm. Nm is one-billionth of a meter and, in semiconductors, represents the least distance between transistors in a chip. Chips are getting smaller and better as researchers find ways to reduce the distance between transistors.

“Support under the scheme shall be provided for six years. The tenure of the actual fiscal support outflow may be extended based on the approval of the electronics and IT minister,” the document said. In case of fiscal support being provided as equity , the government’s share will not exceed 49 percent of total project equity. The scheme will be implemented through a nodal agency called India Semiconductor Mission.

Applicants have to make a minimal capital investment of Rs 20,000 crore. And applicants must have minimum revenue of Rs 7,500 crore (including group companies) in electronics system design and manufacturing in any of the three financial years preceding the year of submission.

The document said that domestic electronics manufacturing has increased substantially over the last few years and is steadily moving from the semi-knocked down (SKD) to the completely knocked down (CKD) stage of manufacturing. “However, domestic value addition is estimated to be in the range of 10 per cent – 30 per cent only, and growth in manufacturing so far has primarily been on account of final assembly using imported components, sub-assemblies/parts, etc. This is due to the lack of a robust semiconductor manufacturing ecosystem in the country,” it said.

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