India offers incentives for high-tech manufacturers

India offers incentives for high-tech manufacturers

India announced new measures to attract high-tech manufacturers to its shores, especially chip makers.

India is introducing new measures to make it a preferred location for manufacturing computer chips and other high-tech goods, its finance minister announced. The absence of large-scale semiconductor manufacturing in the country has been a weak spot in India's advancement as a centre for high-tech development.

The government will assist high-tech manufacturing ventures with both equity participation and viability gap funding, which aims to offset additional costs incurred by new ventures due to India's poor infrastructure, finance minister, P. Chidambaram, said while presenting his annual budget to parliament.

The incentives will be available for three years to accelerate investment in the sector. India's IT ministry will also soon announce a new policy to attract high-tech manufacturers to India, Chidambaram said

The measures announced are a step in the right direction, said Rajendra Kumar Khare, chairman of the Indian Semiconductor Association and head of the Bangalore-based design subsidiary of US chip maker, Broadcom.

The measures should help to attract large foreign chipmakers, which typically expected the local government to participate in the cost of projects, he said.

The viability gap funding would offset additional, extraneous costs incurred by new ventures due to the country's poor infrastructure, Khare said. India wrestled with poor road, communications and port facilities, as well as water and power supply issues in most areas.

The presence of large-scale chip manufacturing has so far eluded India, even as it continues to expand its IT services, software development and other high-tech industries. Several big chip makers, including Texas Instruments and Intel have chip design facilities in India, but they have been reluctant to set up fabrication plants in the country, in part because of the poor infrastructure.

Semiconductor Complex, which is owned by the Indian government, operates a semiconductor fab with outdated process technologies and sub-optimal production scales. It has a 6-inch wafer fabrication facility capable of processing wafers using 0.8-micron manufacturing technology, far behind today's most advanced technologies. This facility is used primarily for pilot production runs of chips the company designs.

In addition, a consortium of investors calling itself SemIndia announced last year that it plans to set up a chip fabrication, assembly and test operation in India in collaboration with the Indian government and Advanced Micro Devices.

SemIndia's chairman, president and chief executive, Vinod Agarwal, has said the cost of the facility would be about $US3 billion.

The investment plan depended on the Indian government also investing in the project, he said.

India's minister of communications and IT, Dayanidhi Maran, met with Intel chairman, Craig Barrett, last year at the company's Santa Clara headquarters to persuade Intel to set up a test and assembly facility in India.

However. the Indian government reportedly was not willing to share the costs of the Intel project. Intel has declined to comment on the matter.

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