India to offer $1billion to chip-makers who ‘makes in India’

India

Officials have confirmed that India is offering more than $1 billion in cash to each semiconductor company that sets up manufacturing units in the country.

Prime Minister Narendra Modi’s ‘Make in India’ drive has helped to turn India into the world’s second-biggest mobile manufacturer after China. New Delhi believes it is time for chip companies to set up in the country.

How to disburse the cash incentives has yet to be decided and the government has asked the industry for feedback.

Governments across the world are subsidising the construction of semiconductor plants as chip shortages hobble the auto and electronics industries and highlight the world’s dependence on Taiwan for supplies.

India also wants to establish reliable suppliers for its electronics and telecom industry to cut dependence on China following border skirmishes last year.

Chips made locally will be designated as “trusted sources” and can be used in products ranging from CCTV cameras to 5G equipment.

However, the sources did not say whether particular semiconductor companies have shown interest in setting up units in India.

India has previously tried to woo semiconductor players but firms were deterred by India’s wobbly infrastructure, unstable power supply, bureaucracy and poor planning.

The renewed government push to lure chipmakers is more likely to succeed, following the success of the smartphone industry, industry insiders say.

Moreover, Indian conglomerates, such as the Tata Group, have also expressed interest in moving into electronics and high-tech manufacturing.

India in December invited an “expression of interest” from chipmakers for setting up fabrication units in the country or for the acquisition of such manufacturing units overseas by an Indian company or consortium.

The government extended the last date of submission for that expression of interest to end-March from Jan. 31, given the level of industry demand, the government source said.

A consortium of investors led by Abu Dhabi-based fund Next Orbit Ventures has shown interest in setting up in India, an auto industry source said.

A shortage of chips is holding back India’s auto sector just when it sees early signs of a recovery in demand after sales plunged in 2020 because of the pandemic.

Indian technology ministry officials met executives from the Society of Indian Automobile Manufacturers (SIAM), a leading auto industry body, earlier this year to assess car makers’ demand for chips, three auto industry sources said on condition of anonymity.

The government estimates it would cost roughly $5-$7 billion to set up a chip fabrication unit in India and take 2-3 years after all the approvals are in place, one of the auto industry sources said.

The source added that New Delhi is willing to offer companies concessions, including waivers on customs duty, research and development expenses and interest free loans.

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