Fiscal support of 50% of capex will be given for setting up compound semiconductors, silicon photonics

NEW DELHI : The Union cabinet on Wednesday sweetened the financial incentives scheme for semiconductor and display manufacturing, aiming to expedite investments in these segments.

The cabinet approved fiscal support of 50% of project cost for semiconductor fabs across all technology nodes and display manufacturing and raised the fiscal support for compound semiconductors, packaging and other semiconductor facilities to 50% from 30%. The ₹ 76,000 crore scheme for chip and display facilities was first announced in December 2021.

“Under the modified programme, a uniform fiscal support of 50% of project cost shall be provided across all technology nodes for setting up of semiconductor fabs," a cabinet statement said.

“Given the niche technology and nature of compound semiconductors and advanced packaging, the modified programme shall also provide fiscal support of 50% of capital expenditure in a pari-passu mode for setting up compound semiconductors/silicon photonics/sensors/discrete semiconductors fabs and ATMP/OSAT," it added.

Under the original scheme, the government offered financial support of up to 50% for companies making semiconductor fabs of the more advanced 28 nanometres (nm) or lower; support of up to 40% to companies making semiconductor fabs of above 28nm to 45 nm; and support of up to 30% to companies making semiconductor fabs of above 45 nm to 65 nm.

By providing financial support of 50% of the project cost for setting up display fabs, the government has also removed the cap of ₹ 12,000 crore per fab.

Fiscal support of 50% of capex will be given for setting up compound semiconductors, silicon photonics, sensors fab and semiconductor ATMP (assembly, testing, marking and packing) facilities or OSAT (outsourced assembly and testing) facilities, in the country. This was earlier limited to 30%.

Minister of state for electronics and information technology Rajeev Chandrasekhar said the government harmonized the sops to be offered to all manufacturers to broaden the horizon for manufacturers willing to come to India as well as open up the addressable market for the chips being made locally for mass and niche products.

“Our initial instinct was that we wanted to be in the leading edge (nodes) because that was the understanding; that was the volume market; but we have realized that there are many manufacturers who were also looking at trailing edge nodes, and we have also come to the conclusion that the Indian market is as lucrative for trailing edge nodes, which are 50-55% of the market, especially in automotive, power, telecom, low-end desktops, laptops. We don’t want to lose out on that," he said.

He expected investments of over ₹ 2 trillion to come to India on the back of the policy. The semiconductor incentives policy will remain an open pipeline for firms till the time the full corpus of incentives of $10 billion is exhausted, he added.

The minister said the corpus itself could be increased if more proposals were approved under the scheme. “If we need to increase the amount of money to further catalyze the semiconductor ecosystem, the government will certainly consider that," Chandrasekhar told reporters.

Industry executives welcomed the changes. “This seminal modification will energize various sectors to include electronics, automotive, defence and aerospace. This will further accrue large investments by companies to set up chip design and manufacturing facilities in India," said Anurag Awasthi, vice president of public policy at India Electronics and Semiconductor Association.

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