Government Eyes Fresh Semiconductor Incentive Package To Attract More Chip-Making Units (image source: iStock)

Semiconductors: The Indian government is poised to launch a substantial multi-billion-dollar incentive package aimed at semiconductor companies, following the near depletion of the Rs 76,000-crore plan initiated in December 2021. According to a TOI report, preliminary efforts for the new package, are expected to surpass its predecessor. Although formal announcements are slated for post-election governance transition, the urgency stems from burgeoning proposals demanding immediate state assurances in terms of incentives.

Rationale for a New Incentive Package

The imminent rollout of a fresh package stems from the success of the December 2021 initiative, which provided fiscal support of up to 50 per cent of project costs to eligible semiconductor fabricators and display manufacturers. This support was nearly exhausted due to a surge in investments, Moreover, the competitive landscape, marked by aggressive investment stances of countries like the US and China, necessitates a robust response to maintain India’s foothold in semiconductor manufacturing.

India’s recent strides in semiconductor manufacturing mark a significant departure from past endeavors. American Micron’s entry into the sector with a Rs 22,500-crore testing and packaging unit in Gujarat in June last year served as a watershed moment. Subsequent approvals for projects worth nearly Rs 1.3 lakh crore in February this year, including Tata Electronics’ Rs 91,000-crore semiconductor fab unit in Gujarat and Tata’s Semiconductor Assembly and Test (TSAT) unit in Assam, signalled a promising shift in India’s semiconductor ambitions.

Emerging Proposals and Urgent Imperatives

The government’s receipt of advanced-stage proposals underscores the pressing need for swift action. Notable among these proposals is Japanese Sharp’s plan for a Rs 40,000 crore display fab unit, poised to be the country’s first. Israel’s Tower Semiconductors’ proposed investment of Rs 90,000 crore underscores the growing interest in India’s semiconductor ecosystem. The urgency lies in providing clarity on incentive support, as companies seek assurances to progress with their investment plans.