Staff Reporter

Semiconductor policy to attract $10 b FDI

  • Differential treatment for units in SEZs
  • Prices of electronic items may come down

    NEW DELHI: The Central Government on Thursday announced its much-awaited semiconductor policy, giving major subsidy to global firms for setting up semiconductor fabrication and other high-end manufacturing units in India.

    The new policy is likely to attract foreign direct investment (FDI) of around $10 billion in the coming years, leading to employment generation. It will also help in gradual reduction in the prices of electronic items like LCD monitors, storage devices and mobile phones. The Union Cabinet had given `in principle' approval to proposal of the Department of Information Technology's in this regard in January. This policy will be operational till 2010.

    Lauding the Government's "bold decision", Union Communications and IT Minister Dayanidhi Maran said global manufacturers setting up semiconductor fabrication and other high-end manufacturing units outside the special economic zones (SEZs) would get a capital subsidy of 25 per cent during the first ten years. These companies will also be exempted from the countervailing duty on capital goods. However, for semiconductor manufacturers setting up units in SEZs, the incentive would be 20 per cent of the capital expenditure during the first ten years.

    In the case of semiconductor manufacturing, the threshold investment would be Rs. 2,500 crore to avail of the subsidy, while in the case of manufacturers of other products like storage devices, micro and nanotechnology products, assembly and testing of all these products and organic light emitting diodes, the minimum investment required will be Rs.1,000 crore.

    Stating that the new policy will meet the requirements of global players who have been demanding subsidy for setting up manufacturing units, Mr. Maran said a typical fabrication unit required a minimum $3 billion investment from global players and India could easily get two to three such units soon. Interestingly, lack of a policy had led to the world's largest chip maker Intel preferring Israel over India for setting up its fabrication unit. The Union Minister said setting up of new units would not take much time as many companies already set up their design centres in India that could be easily converted into full-fledged production units. He hoped that in the next two to three years when the new plants started production, it would lead to reduction in the prices of electronic items and give a boost to IT-penetration.

    Welcoming the policy, the Manufacturers' Association for Information Technology (MAIT) said it is a significant step towards creating a conducive ecosystem for IT manufacturing in the country.

    According to MAIT's Executive Director Vinnie Mehta: "The policy will pave 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."

    PTI reports:

    The India Semiconductor Association President, Poornima Shenoy, said the policy would provide an impetus for further growth of the sector, the electronics industry and the overall ecosystem.