BANGALORE: India is to offer microchip makers incentives including tax breaks and subsidies to set up factories, a policy the industry welcomed on 23 February to lure global giants and turn the country into a chip manufacturing hub.
“The policy will go a long way in making India an attractive destination for global semiconductor and hi-tech companies,” said Poornima Shenoy, president of the Bangalore-based India Semiconductor Association.
The blueprint, unveiled in New Delhi on 22 February by Information Technology and Communications Minister Dayanidhi Maran, who estimated that it will attract an investment of $9 billion (Rs 39,854 crore). This will spur rapid growth of India’s entire electronics industry, said Shenoy.
She estimated India’s electronics market will expand to $363 billion by 2015 from $28 billion last year.
Demand for chips that go into products ranging from mobile phones, liquid crystal displays and smart cards to personal computers and automobiles will reach $36 billion by 2015, a compelling case for chip manufacturers to set up factories in the country to tap the local market, Shenoy said.
“There are at least two major multinationals looking to invest in India as well as local manufacturers. We see investment not just in chip manufacturing but also in the entire electronics eco-system,” she said.
The policy is aimed at turning the country from a designer of chips into a manufacturing base in competition with the likes of China, Singapore and Taiwan, that have long promoted the industry.
“This will pave the way for high-end capital intensive IT manufacturing,” said Vinnie Mehta, executive director, Manufacturers Association of Information Technology.
The policy will enable the “industry to graduate from the current assembly-oriented operations to deep and competitive manufacturing capabilities.”
Globally, the microchip industry is worth an annual $240 billion, according to the India Semiconductor Association. India has 11 non-commercial chip fabrication units, or fabs, focussed on defence and aerospace.
India is already a software powerhouse, with exports set to climb 32% in the year ending March to $32 billion. But the country’s hi-tech manufacturing hasn’t kept pace.
Microchips “form the heart of hardware and soul of software in any electronic system,” said Rajendra Kumar Khare, an electrical and electronics engineer who heads technology start-up firm Indusedge.
“Cultivation of a robust and scalable semiconductor industry is the key to making the great electron revolution happen,” he added.
Besides chipmakers, manufacturers of such products as liquid crystal and plasma display panels, storage devices, solar cells and photo voltaics will be eligible for the incentives, valid for the first 10 years of operations.
As part of the policy to push microchip manufacturing, the government also promised interest-free loans for subsidising capital expenditure incurred in setting up chip manufacturing units. The incentives will be valid for the first 10 years of operations.
The incentives may prove to be a magnet for giants such as Intel, AMD, Infineon, IBM and Toshiba, according to the leading newspaper.