R Jai Krishna

NEW DELHI: The Indian Government today announced the Semiconductor policy, after the Union Cabinet had approved the Special Incentive Package Scheme for setting-up fabs and other micro and nanotechnology manufacturing units.

The Union Cabinet had in its meeting held on Jan. 11, accorded in principle approval to the proposal of Department of Information Technology regarding Special Incentive Package Scheme to attract investments for setting up semi fabrication and other micro and nanotechnology manufacturing industries in India.

“In the cabinet meeting held today, the details of incentives were also approved in continuation of the approval given on January 11, 2007,” the government said.

The incentive will be for the manufacture of all semiconductors; displays including LCD, OLED, PDP, other advanced micro and nanotechnology products; assembly and test of all the above products

In the case of semiconductor manufacturing (Wafer Fab) products, the threshold NPV of investments would be Rs 2500 crore. The threshold NPV of investments in manufacture of other products would be Rs 1000 crore.

The policy note said that if a unit is located in SEZ, the incentive would be 20 per cent of the capital expenditure during the first 10 years and for unit located outside SEZ, the incentive would be 25 per cent of the capital expenditure during the first 10 years and counter-veiling duty on capital goods would be expected.

Announcing the policy, Communications and IT minister Dayanidhi Maran said India has the ecosystem to take 2-3 fabs, each requiring a minimum of $3 billion. He said the country can now expect FDI to the tune of $10 billion.

Incidentally, chipmaker Intel had set up a fab in Israel after rejecting India for the want of a semicon policy.

Reacting to the announcement of the semiconductor policy, Vinod Agarwal, founder, chairman and CEO of SemIndia, expressed excitement in the Indian Government taking a step in the right direction at this crucial juncture.

“This policy announcement will give a major fillip to high tech manufacturing in the country which can become a significant contributor to the Indian economy. The Government of India has started another new chapter in India through this semiconductor policy which will lead to the same kind of achievements that the Software policy did about 15 years back,” he said.

He complimented Prime Minister Dr Manmohan Singh for his dynamic leadership, and Union Finance Minister P Chidambaram, as well as Union Minister for Communications and Information Technology for their strong commitment to the semiconductor industry and for paving a new avenue.

“The policy will truly strengthen the visionary steps taken by chief minister of Andhra Pradesh Dr Rajasekhar Reddy in planning the ‘Fab City’, the High Technology Manufacturing cluster,” Agarwal said further.

SemIndia is setting up a fab near Hyderabad in Andhra Pradesh.

“The Indian Semiconductor Association (ISA) has done a fabulous job and played seminal role in convincing the Government of India to the needs of such a policy. This synergy between industry and Government will positively motivate global investors and semiconductor companies like SemIndia to come to India for their future plans in semiconductor manufacturing,” he added.

Speaking to CyberMedia News in Bangalore, B V Naidu, managing director, SemIndia Systems and SemIndia Fabcity, said "This is a good beginning. Industry requested for 25 per cent but government has given 20 per cent, but not a matter of concern. With this announcement we can expect more FDI coming into India in this space. SemIndia was waiting for this policy and now we go ahead with our plans to set-up unit in Hyderabad as we had announced earlier."

In a press note Bob Kondamoori, managing partner of Sandalwood Partners, the anchor investors in the SemIndia semiconductor foundry project, said: “The announcement of the semiconductor policy is a great positive signal to the investors like us.”

“The Venture Capital investor community has been waiting for a focused policy with right package of incentives for sometime now and this progressive policy will motivate many more investors like us to look at India as an attractive investment destination in this space. Overall, the birth of Semicon policy will give an impetus to sector. Our ardent wish is that the government should also follow up this policy formation by creating the right mechanism to implement it also. With this, India will be in global league and market sensitivity and operational diligence will be the imperatives for ensuring success of such high ticket projects,” Kondamoori added.

MAIT, the apex body representing India’s IT hardware, training and R&D services sectors, welcomed the announcement, saying it was a significant step towards creating a conducive ecosystem for IT manufacturing in the country and is set to change the landscape of the same in India.

“The policy, we hope provide impetus to paving the way for high-end capital intensive IT manufacturing, thus enabling the industry to graduate from the current assembly oriented operations to deep and competitive manufacturing capabilities,” Vinnie Mehta, executive director of MAIT said in a statement.

He hoped that the policy will enable India to emerge as a preferred manufacturing destination for critical components as LCDs, storage devices, solar cells and other advanced nano and micro technologies.

“With growing consumption of IT and consumer electronics, India is now ready for semiconductor production. The policy will also give a boost to the fab-less industry in India as it will enable prototyping and market testing for new products. The industry now eagerly awaits the announcement of electronics and IT Hardware manufacturing policy,” he added.

(With additional inputs from Bangalore Bureau)

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