According to Reuters, two Indian officials said that the country is providing more than $1 billion in cash to each semiconductor company that has established a production unit in India. This is because India strives to gain a foothold in the smartphone assembly industry and strengthen its electronics supply chain. .
Prime Minister Narendra Modi’s “Made in India” plan makes India the world’s second largest mobile phone manufacturer after China. New Delhi believes that it is time for chip companies to be established in the country.
A senior government official told Reuters: “The government will provide more than $1 billion in cash rewards to each company that will set up a chip manufacturing department.” He declined to be named because he was not authorized to speak to the media.
“We assure them that the government will become a buyer, and there will be mandatory regulations in the private market (for companies to buy locally made chips).”
Another government source who asked not to be named said that how the cash incentives will be issued has yet to be determined, and the government has asked the industry to provide feedback.
As the shortage of chips plagues the automotive and electronics industries and highlights the world’s dependence on Taiwan’s supply, governments around the world are subsidizing the construction of semiconductor factories.
India also hopes to establish reliable suppliers for its electronics and telecommunications industries to reduce its dependence on China following last year’s border conflict.
The first source said that locally made chips will be designated as “trusted sources” and can be used in products ranging from CCTV cameras to 5G devices.
However, the source did not disclose whether specific semiconductor companies are interested in setting up divisions in India.
The Ministry of Science and Technology of India did not respond to a request for comment.
India has tried to attract semiconductor manufacturers before, but India’s unstable infrastructure, unstable power supply, bureaucracy and poor planning have discouraged companies.
According to industry insiders, with the success of the smartphone industry, the government’s re-launched efforts to attract chip manufacturers are more likely to succeed.
In addition, Indian companies such as Tata Group have also expressed interest in entering the electronics and high-tech manufacturing industries.
India invited chip manufacturers to express “interest” in December last year to set up manufacturing departments in the country or buy such manufacturing departments overseas by Indian companies or consortia.
Government sources said that in view of the continued high level of industry demand, the government extended the deadline for submission of this letter of intent from January 31 to the end of March.
An auto industry source said that a consortium of investors led by Abu Dhabi-based fund Next Orbit Ventures has shown a strong interest in establishing a company in India.
Next Orbit did not respond to a request for comment.
Chip shortages have stalled India’s auto industry, and demand is showing signs of recovery just after India’s sales plummeted in 2020 due to the pandemic.
Three auto industry sources, who asked not to be named, said that officials from the Ministry of Science and Technology of India met with senior executives from the Association of Indian Automobile Manufacturers (SIAM), a leading auto industry group, at the beginning of this year to assess the demand for chips from automakers.
An auto industry source said that the government estimates that the establishment of a chip manufacturing unit in India will cost about US$5 to 7 billion, and all approvals will be completed in 2-3 years.
The source added that New Delhi is willing to provide companies with concessions, including tariff exemption, research and development expenses and interest-free loans.