India’s $10 Billion Plan To Attract Chip Makers

India has announced a plan to attract and encourage the opening of semiconductor and display manufacturing facilities in the country.

India’s technology minister has approved a $10 billion incentive plan to attract semiconductor and display manufacturers, Reuters reported on Wednesday, as part of a drive to establish the Asian country as a global electronics production hub.

It comes after Intel’s CEO Pat Gelsinger reportedly said on Thursday that the American chip giant will invest 30 billion ringgit ($7.10 billion) in Malaysia over a decade to build new assembly and testing facilities, with production expected to begin in 2024.

India incentives

However, constructing new chip factories is a very expensive business, and in many parts of the world, chip makers seek incentives or favourable tax rates from local officials to help fund the construction of new facilities.

India’s plan will see the Indian government extend fiscal support of up to 50 percent of a project’s cost to eligible display and semiconductor manufacturers.

This is a policy that worked recently in Japan for example.

In October reports suggested that chip contracting giant Taiwan Semiconductor Manufacturing Co (TSMC) was considering building a chip factory in conjunction with Sony Corp, alongside a 50 percent investment from the Japanese government.

Soon after that TSMC officially confirms plans to build a new factory in Japan.

India also wants to ramp up its tech manufacturing capabilities, and Israel’s Tower Semiconductor, Taiwan’s Foxconn and a consortium from Singapore have shown interest in setting up chip factories in India, Reuters reported.

In addition, Vedanta Group was keen to set up a display plant, a government source told Reuters.

“The program will usher in a new era in electronics manufacturing by providing a globally competitive incentive package to companies in semiconductors and display manufacturing as well as design,” the Indian government statement reportedly said.

Technology Minister Ashwini Vaishnaw told a news briefing the plan would help develop “the complete semiconductor ecosystem – from the design of semiconductor chips to their fabrication, packing and testing in the country”.

The government said it expected the scheme to create about 35,000 high-quality positions, 100,000 indirect jobs and attract investment worth 1.67 trillion rupees ($8.8 billion).

Local incentives

India’s move should come as no surprise to industry observers.

Amid an ongoing global shortage of chips, the European Union in March announced it wanted to produce at least 20 percent of the world’s cutting-edge semiconductors by the end of the decade, as part of its 2030 Digital Compass plan.

A couple of months later in May, Intel’s Pat Gelsinger said the firm was looking for 8 billion euros (£7bn) in public subsidies toward a planned semiconductor fabrication plant in Europe.

Last month the European Union was reportedly considering a possible relaxation of rules over state-aid funding, to bolster the building of new chip factories.

Intel’ Pat Gelsinger in September said the chip giant planned to announce the locations of two major EU chip plants by the end of the year (Germany and France are the leading contenders) as it prepares to spend 80bn euros on the continent in the next decade.

In October Italy was reportedly negotiating with Intel to convince it to build a 4 billion euro (£3.4bn) advanced chip packaging plant in that country.