What makes Gujarat preferred destination for semiconductor manufacturers?

Within a year of framing a dedicated policy for semiconductor sector, Gujarat has bagged one more mega investment from a leading US chip maker—Micron Technology.

In fact, Gujarat was the first and remains the only Indian State to have a policy for the semiconductor sector. The State launched the Semiconductor Policy 2022-27 in July 2022 and by September 2022, the State received $20 billion (about ₹1.5-lakh crore) investment jointly by global mining major Vedanta and Taiwanese electronics maker Hon Hai Technology Group (known as Foxconn) for a semiconductor fabrication unit, a display fabrication unit, and a semiconductor assembling and testing unit.

Micron has recently announced that it would invest $2.75 billion in a phased manner for its outsourced semiconductor assembly and testing facility in the State.

What makes Gujarat a preferred bet?

The Centre announced the India Semiconductor Mission (ISM) in 2021 to incentivise investments in semiconductor sector. Gujarat was the first State to make most out of it. Industry insiders consider the State’s policy as a big positive for investors who look for transparency, certainty and predictability over “closed-door negotiations”.

Speaking to businessline, Darshan Shah, Chairman, CII Gujarat State Council and Managing Director of Hitachi Hi-Rel Power Electronics, highlighted the benefits of investing in Gujarat.

“The first and foremost is the policy support. Second is the availability of infrastructure such as power supply, utilities, etc. Another major factor is the pace at which the decision-making is done.”

The State came out with its semiconductor policy within a year after the Centre announced ISM.

Besides the quality infrastructure, land prices are lower in Gujarat than other regions, say stakeholders.

Upcoming airport at Dholera is an added extraction to Gujarat.

Power Generation

Gujarat has a total installed capacity of 23,550MW from conventional sources, while its installed renewable energy capacity is pegged at 16,588 MW, one of the highest in India.

Ajit Shah, President of Sanand Industries Association, said, “Availability of surplus power, Narmada water, access to a large coastal area and industrial peace are some of the major positives for semiconductor projects.”

Gujarat has launched Gujarat State Electronics Mission (GSEM) to promote electronics manufacturing, semiconductors and display industry. The mission comprises domain experts, sector experts, scientists and government officials. The mission is said to have ensured faster response for the proposals and, thus, the turnaround time.

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The Indian Institute of Technology Gandhinagar (IIT-GN) is said to be tasked with developing a 5G use-case laboratory and a semiconductor laboratory to support the design and testing ecosystem.

The government’s pro-active approach while reaching out to semiconductor hubs such as Taiwan, China, the US and Japan has also helped the State in attracting big ticket investments.

“The State government’s dedicated investment mechanism, ease of doing business framework, on-ground supporting infrastructure, utilities and an overall robust manufacturing ecosystem are doubling up Gujarat’s prospects as a preferred investment destination for such projects,” a source said.

Policy support

Gujarat’s Semiconductor Policy 2022-27 provides an additional capital assistance to the manufacturers.

“The additional capital assistance from the State government will be provided at the rate of 40 per cent of capex assistance given by the Centre,” reads the policy statement.

Under its cluster-based approach, the State government is planning to develop a Semicon City at Dholera Special Investment Region (Dholera SIR).

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All eligible projects are being offered 75 per cent subsidy on first 200 acres of land purchase, while there is a 50 per cent subsidy on additional land required for FAB or upstream/downstream projects as approved under Centre’s ISM.

One-time complete refund of stamp duty and registration fee, power tariff subsidy of ₹2 per unit and complete exemption on electricity duty are some of the attractions. The policy envisages to generate employment for over 2 lakh people over the next 5 years.

According to sources, many other investors are showing interest to set up semiconductor manufacturing plants in Gujarat.

Gujarat’s plan is to become a silicon valley like Taiwan.

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