Exclusive: $ 1 billion for every chipmaker who “makes in India”, sources say

NEW DELHI (Reuters) – India is offering more than $ 1 billion in cash to every semiconductor company that sets up manufacturing units in the country as it seeks to expand its assembly industry from smartphones and strengthen its electronics supply chain, two officials said.

FILE PHOTO: A woman visits a semiconductor display at the Home Appliances and Electronics (AWE) World Expo in Shanghai, China March 23, 2021. REUTERS / Aly Song / File Photo

Prime Minister Narendra Modi’s “Make in India” campaign has helped make India the world’s second-largest cellphone maker after China. New Delhi believes it is time for microchip companies to move into the country.

“The government will offer cash incentives of more than $ 1 billion to every company that sets up chip manufacturing units,” a senior government official told Reuters, declining to be named because he did not. was not allowed to speak to the media.

“We assure them that the government will be a buyer and that there will also be mandates in the private market (for companies to buy locally made chips).”

How to disburse the cash incentives has yet to be decided and the government has asked the industry for comment, said a second government source, who also declined to be identified.

Governments around the world are subsidizing the construction of semiconductor factories as chip shortages hamper the automotive and electronics industries and highlight Taiwan’s global dependence for supply.

India is also keen to establish reliable suppliers for its electronics and telecommunications industry to reduce its dependence on China following last year’s border skirmishes.

Locally manufactured chips will be referred to as “trusted sources” and can be used in products ranging from CCTV cameras to 5G equipment, the first source said.

But the sources did not say whether any semiconductor companies have expressed interest in setting up units in India.

India’s Technology Ministry did not respond to a request for comment.

PREVIOUS ATTEMPTS

India has tried to win over semiconductor players before, but companies have been deterred by India’s wobbly infrastructure, unstable power supply, bureaucracy and poor planning. (reut.rs/3fyV6Zr)

The government’s renewed efforts to attract chipmakers are more likely to succeed, following the success of the smartphone industry, according to industry insiders.

In addition, Indian conglomerates, such as the Tata Group, have also expressed interest in getting into high-tech electronics and manufacturing.

India invited in December an “expression of interest” from chipmakers for the establishment of manufacturing units in the country or for the acquisition of such manufacturing units abroad by an Indian company or consortium. .

The government has extended the deadline for submitting this expression of interest to the end of March from Jan. 31, given the level of demand from the industry, the government source said.

The Abu Dhabi-based Next Orbit Ventures fund has applied to set up in India, he said on Wednesday. An auto industry source said she did so as the leader of a consortium of investors.

A chip shortage is dragging the Indian auto sector back just as it sees the first signs of a recovery in demand after sales slump in 2020 due to the pandemic.

Officials from the Indian Ministry of Technology met earlier this year with executives from the Society of Indian Automobile Manufacturers (SIAM), a leading body in the auto industry, to assess the demand for chips from automakers, said three sources from the automotive industry on condition of anonymity.

The government estimates that it would cost around $ 5-7 billion to set up a chip manufacturing unit in India and that it would take 2-3 years after all approvals were in place, the company said. one of the sources of the automotive industry.

The source added that New Delhi is willing to offer companies concessions, including duty exemptions, research and development spending and interest-free loans.

Reporting by Sankalp Phartiyal and Aditi Shah; Additional reporting by Douglas Busvine and Mathieu Rosemain; Editing by Barbara Lewis and Jan Harvey

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