India approves setting up of fab units at Yamuna Expressway and Prantij, Gujarat

India has approved the setting up of semiconductor wafer plants, commonly known as fab units, by two consortia costing a total of Rs. 63,410 crores.

India, which wants local production of chips to cut long-term import bills, has renewed a drive to attract investments after a previous attempt failed. The two groups had proposed building plants in India in September.

One of the consortia is made up of Jaiprakash Associates Ltd and TowerJazz and IBM. It plans to set up a plant near New Delhi at a cost of Rs. 34,399 crores, a government statement said on Friday.

The second comprises HSMC Technologies India Private Ltd, Malaysia's Silterra and STMicroelectronics. The group has proposed investment of Rs. 29,013 crores for a plant in the western Gujarat state, the statement said.

The final agreements for the two plants are expected to be signed by August.

With a view to attract chipmakers to set up plants in India, the government is offering concessions including 25 percent subsidy on capital spending, tax breaks, and interest-free loans of about 51.24 billion rupees to each plant.

India's demand for electronics products is forecast to rise nearly 10 times during this decade to reach $400 billion by 2020, causing policy makers to worry that electronics imports, with no major local manufacturing, could exceed those of oil.

Here's the press release issued by the government in full:

Approval to establish two Semiconductor Wafer Fabrication Manufacturing Facilities in India

The Cabinet has approved setting up of two Semiconductor Wafer Fabrication (FAB) Manufacturing Facilities in India. These FAB units are to be set up by two business consortia, with the following broad project parameters:

(i) M/s Jaiprakash Associates Limited (with IBM, USA and Tower Semiconductor Limited, Israel as partners)

a) Project Cost: Rs 34,399 crore

b) Technology: 90/65/45/28 nm

c) Capacity: 40,000 WSPM

d) Location: Yamuna Expressway, Uttar Pradesh

(ii) M/s HSMC Technologies India Pvt. Ltd. (with ST Microelectronics and Silterra Malaysia Sdn. Bhd. as partners)

a) Project Cost: Rs 29,013 crore

b) Technology: 90/65/45/28/22 nm

c) Capacity: 40,000 WSPM

d) Location: Prantij, Gujarat

Letter of intent will be issued to the two consortia by March 31, 2014. The final agreements are expected to be signed by August 2014. The Empowered Committee has been authorized to take all decisions to implement the FAB projects in furtherance of the decision.

The proposed FABs will create direct employment of about 22,000 and indirect employment of about one lakh.

These FABs will have a big impact on the development of Electronics System Design and Manufacturing eco-system across the country. This will help set up a critical pillar required to promote Electronics System Design and Manufacturing in India. The Semiconductor Wafer Fabrication units when set up, will stimulate the flow of capital and technology, create employment opportunities, help higher value addition in the electronic products manufactured in India, reduce dependence on imports, and lead to innovation.

The following main incentives will be extended:

i. 25% subsidy on capital expenditure and tax reimbursement as admissible under Modified Special Incentive Package Scheme (M-SIPS) Policy.

ii. Exemption of Basic Customs Duty (BCD) for non-covered capital items

iii. 200% deduction on expenditure on R&D as admissible under Section 35(2AB) of the Income Tax (IT) Act.

iv. Investment linked deductions under Section 35AD of the IT Act.

v. Interest free loan of approx. Rs 5124 crore each. (Exact amount to be calculated on Detailed Project Report appraisal.)

Background
The Government had in 2011 constituted an Empowered Committee (EC) to identify technology and investors and to recommend incentives to be provided to set up two FAB facilities in the country. The Empowered Committee had issued a Global Expression of Interest inviting technology providers and investors to set up the FAB facilities. This Committee submitted its recommendations to the Government in March 2013. The Cabinet, at its meeting held on 12.9.2013, considered the recommendations of the EC and accorded 'in-principle' approval to the two consortia referred to above and to the package of incentives. The Cabinet also decided that all other FAB manufacturers may also be appropriately and fully apprised of the quantum of subsidy/other benefits/support being offered for establishing FAB facilities in India. Such manufacturers may be asked to indicate their interest / send their responses on specified parameters to the Department of Electronics and Information Technology (DeitY) within a period of four weeks.

As decided by the Cabinet, the second Expression of Interest (EoI) was published, which clearly specified the project parameters required as well as the package of incentives being offered by Government of India. 106 potential FAB manufacturers across the world were also directly addressed. No new proposal has been received for setting up of a FAB as per EoI requirements. The steps taken pursuant to the aforesaid Cabinet decision have doubly assured the transparency of the entire process and also ensured a level playing field.

Edited by NDTV staff from original story by Reuters