India To Unveil A Package Of Incentives For Semiconductor Chip Manufacturing: PM Modi At The Sydney Dialogue

Delivering the keynote address at The Sydney Dialogue today on the theme "India's technology evolution and revolution", Prime Minister Narendra Modi revealed that India is working on offering slew of incentives to global semiconductor manufacturing companies to set up chip production facility in India.

"We are focussing on hardware. We are preparing a package of incentives for becoming a key manufacturer of semiconductors." the Prime Minister during his address

(Incentive package for semiconductor manufacturing at 12:05m of video below)

While there have been several speculative reports in the media over India's plans to offer subsidies for semiconductor (chip) manufacturing , this is the first time that Prime Minister himself has indicated that the government is working towards unveiling an package.

Earlier this month, The Times Of India reported that the Indian government is set to roll out a mega multi-billion-dollar capital support and production-linked incentive plan to push manufacturing of semiconductors in the country.

According to the report, senior officers are engaged in active discussions with some of the top semiconductor makers such as Taiwan Semiconductor Manufacturing Co. (TSMC), Intel, AMD, Fujitsu, United Microelectronics Corp.

While TSMC and UMC are Taiwan based pure play foundries which do contract manufacturing of chips, AMD is a fabless company which focuses mainly on design of chips. Intel and Fujitsu are Integrated Device Manufacturers which do both design as well as fabrication of chips in their own foundries.

According to few industry sources the Prime Minister's Office (PMO) is coordinating the efforts to design attractive incentives to lure leading chip manufacturers. The incentive likely to be offered include financial support on capital expenditure, tariff reductions on certain key components and Production-Line Incentive (PLI) scheme on lines offered to several strategic sectors. The government is also working on additional incentives to boost fabless startups also in India.

Historically TSMC has not been keen expanding its footprint outside Taiwan. Morris Chang, the founder of Taiwanese chip manufacturing behemoth, has repeatedly expressed concern over the concerted efforts by nations to bring chip production onshore in a bid to achieve self-sufficiency in semiconductors. However worries over supply chain shocks and growing geopolitical concerns about China's expansionist designs — concerns have drive U.S.to get TSMC and competitors to set up shop on U.S. soil too.

Earlier this month, TSMC announced that it is forging a partnership with Sony to build a new chip manufacturing unit in Japan with Sony and start producing chips by 2024.

If India is able to persuade TSMC or any of the leading chip manufacturers to set up a facility here , it can potentially leapfrog to cutting edge of chip production. It is also possible that it could settle for a "mature node" technology like 22nm or 28nm

Some analysts believe that India could offer incentives for TSMC or leading manufacturers modelled along the lines of what Japanese government offered. In bid to regain its competitiveness in chip manufacturing, Japan offered subsidies up to $3.5 billion out of a total estimated cost of $7 billion for the upcoming TSMC-Sony fab.