Semiconductor Incentive: Cabinet Approves Incentive of 50% of Project Cost for Establishment of Semiconductor Units

The Union cabinet on Wednesday approved a uniform incentive of 50% of the project cost for the placement of semiconductors, displays and compounds semiconductor manufacturing United

The 50% tax support for the three programs was based on a unanimous recommendation by an advisory committee made up of experts from around the world, the Ministry of Electronics and Information Technology said.

Previously, all three schemes had an incentive range of 30-50%.

While installation incentives semiconductor manufacturing was based on chip size, for display manufacturing and compound semiconductor factories, the incentives were largely 30% of the total project cost.

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“Given the niche technology and nature of compound semiconductors and advanced packaging, the amended program will also provide tax support of 50% of capital expenditures in pari-passu mode (on a par ) for the establishment of compound semiconductors, silicon photonics, sensors and discrete semiconductor fabs,” the ministry said in a statement.

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The changes to the scheme aim to harmonize incentives for different categories, Minister of State for Electronics and Computing, Rajeev Chandrasekharthey said.

“The semiconductor policy changes that were announced in December 2021 indicate a strategy on the part of the government in which we are harmonizing incentive programs across the different categories of semiconductor manufacturing, display manufacturing and compound semiconductor fabrication,” Chandrasekhar said. “By doing this, the semiconductor policy is extremely competitive and attracts investment across the spectrum – which is silicon, compounds and fabs.”

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When the government announced the program in December last year, advanced nodes such as 28 nanometers (nm) were likely to attract higher incentives than others such as 65 nm.

The government, however, decided that a uniform incentive should be given to all schemes to ensure the presence of players in all segments, Chandrasekhar added.

With Union cabinet approval of the expansion of the program to include 65nm and larger semiconductor chips, the total planned investment in the sector is expected to reach $25 billion, it said. he said, adding that within the country itself, the need for semiconductors in the 65 nm node and above accounted for 50% of the total demand, he added.

The Union cabinet also on Wednesday scrapped the incentive limit of Rs 12,000 crore for setting up display manufacturing units and allowed companies that manufacture semiconductor nodes above 65 nm to apply for incentives under the semiconductor manufacturing program.

A senior executive at ISMC Analog, one of the fabulous incentive applicants, told ET that the consortium lobbied for the initial incentive tranche to be 50% for everyone, “both verbally and in writing to ISM at our June meeting.”

Previously, a senior manager of the
Vedanta-Foxconn joint venture said the focus was on the 28nm segment, used in smartphones and other advanced gadgets.

ISMC Analog, which has applied for a $3 billion manufacturing unit in Karnataka, had set its target around the 65nm section, for which the incentive has risen from 30% of project cost to 50% now.

It is not yet clear which node the other consortium, IGSS Ventures, would focus on.

In billboard fabs, candidates such as Vedanta and Elest should benefit from the higher incentives.

“In a certain sense, it seems that the government listened to all the stakeholders and realized that the candidates find it difficult to make a decision on the nodes, so they simplified it,” said Arun Mampazhy, a veteran of the semiconductor industry, to ET.

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