The Hindu Business Line : Govt working on incentive package for chips sector

The details
The policy might address incentives to companies related to chip manufacturing, and not those involved in research and development.
The Government has sought assistance from global majors such as Intel to work out the details since this is the first time that such a policy is being formulated.

New Delhi , Jan. 18

The Finance Minister, Mr P. Chidambaram, is expected to announce incentives for boosting the semiconductor industry in his Budget speech this year.

While the Union Cabinet had given in-principle approval to the semiconductor policy, the Cabinet Secretary is working out the details of thesops to be given to fabrication companies setting up base in the country.

"The Prime Minister has asked the Cabinet Secretary to work out the details of the fab policy in two weeks time. So it is likely to be announced by the Finance Minister during the Budget," said an industry source close to the development.

Incentives

They said the policy might address incentives to companies related to chip manufacturing and not those involved in research and development. Sources also said that the Government had sought assistance from global majors such as Intel to work out the details since this was the first time that such a policy was being formulated.

Some of the proposals being discussed include providing 25 per cent incentive on capital expenditure incurred by the semiconductor industry during the first ten years if there is a minimum investment of Rs 2,500 crore.

Further, the Government has also been contemplating equity participation of 26 per cent in some of these projects.

The policy will benefit companies such as AMD, SemIndia, Intel and Taiwanese chip manufacturing firms who have plans to set up units in India. Through this policy, the Government is targeting to build an ecosystem that will boost consumer electronics segment in the country. It will also help mobile handset manufacturers such as Nokia who have set up base in India.

Demand

Domestic demand for semiconductors is expected to be $363 billion by 2015 and 11 per cent of global demand. A study conducted by the Indian Semiconductor Association and Frost & Sullivan estimates that the semiconductor industry will be one of the largest job creators, employing over 9.35 million people directly and indirectly in the country.

With the Government offering incentives and by creating a level-playing field, the country could attract investments to the tune of $100 billion over the next ten years in chip and hi-tech manufacturing.