India Said to Approve Micron's $2.7 Billion Semiconductor Testing Plant Ahead of PM Modi's US Visit

India's cabinet has approved US chipmaker Micron Technology's $2.7 billion (roughly Rs. 22,159 crore) plan for a new semiconductor testing and packaging unit, a senior government source said on Tuesday ahead of Prime Minister Narendra Modi's state visit to the US.

The government agreed production-linked incentives worth Rs. 110 billion ($1.34 billion) for the plant, which is set to be built in PM Modi's home state of Gujarat, the Indian official added. He declined to be identified ahead of a planned announcement during PM Modi's visit.

Cabinet approval was required due to the size of the incentive package, the source added. Micron's plan had been previously reported but not the approval by cabinet.

Spokespeople for Micron and the Indian government, including its technology ministry, did not respond to requests for comment.

During his visit, which starts on Tuesday, PM Modi will meet the chief executives of a number of top American companies, including FedEx and MasterCard, and will be hosted at a state dinner in the White House on June 22.

Micron Technology's plans come as the White House presses US chip companies to invest in India with talks ongoing about possible further investments, US administration officials told Reuters.

Biden wants domestic companies to decrease the risks of doing business in China while better integrating the US economy with that of the world's largest democracy, one US official said.

A senior Biden administration official said the White House was "encouraged" by the number of US firms considering India investments.

China in May said Micron had failed a security review and barred operators of key domestic infrastructure from purchasing products from the United State's biggest memory chipmaker, angering the Biden administration. The U.S. Commerce Department declined to comment.

An Indian industry source familiar with Micron's approvals said the so-called Assembly Testing Marking and Packaging will be built in the city of Sanand.

Such units test and pack semiconductor chips, but do not manufacture them. Micron could procure and package chip for clients at the plant, or other companies could send their chips for testing before shipping.

The source added that Micron's India plant would boost PM Modi's vision of making India a semiconductor base but true success would require actual manufacturing.

Reuters reported this month that three big companies, including a Foxconn joint venture, that bid for Indian semiconductor incentives were struggling due to the lack of a technology partner.

The Micron deal "helps the vision but not in a phenomenal way because still the major part of puzzle lies in setting India as a semiconductor base," said the industry source.

© Thomson Reuters 2023