India Plans to Extend Fiscal Support for Semiconductor Mission to Eight Years

Government Mulls Extension for Semiconductor Mission

The Indian government is considering extending the fiscal support period for the second phase of the India Semiconductor Mission (ISM) from the current five years to eight years. This move aims to bolster the country’s semiconductor industry and encourage more investments in chip manufacturing and related technologies.

Additional Financial Grants and Support

Under the proposed extension, approved projects may benefit from additional financial grants. These grants could be utilized for employee skill training, interest-free loans, and preferential access to domestically manufactured and packaged chips. This is part of the government’s broader strategy to enhance the semiconductor sector’s capabilities and infrastructure.

Changes to Financial Incentives

The second phase of the ISM may see modifications in the financial support structure. Specifically, the government may withdraw financial support for technology transfer costs and instead increase funding for administrative expenses. Additionally, the incentives for outsourced assembly and testing units might be reduced from the current 50% to less than 30% in the new phase. The new phase is also expected to provide clearer reimbursement guidelines and offer incentives of 30-35% of total capital expenditure for setting up related units.

New Budgetary Allocation and Project Approvals

The ISM is anticipated to receive a second budgetary allocation of up to $10 billion, given that funds from the first phase, which totaled $11 billion, are nearing exhaustion. Notable projects approved under the first phase include a Tata Group-Powerchip Semiconductor Manufacturing Corp chip fabrication unit in Gujarat and four chip packaging units in Gujarat and Assam.

Recently, a $10 billion investment proposal by Tower Semiconductor and Adani Group for a new semiconductor chip manufacturing unit in Maharashtra received approval. This facility is set to have a capacity of 40,000 wafer starts per month (WSPM) initially, with plans to expand to 80,000 WSPM.

Impact on India’s Semiconductor Industry

These developments signal the Indian government’s commitment to establishing the country as a significant player in the global semiconductor industry. By extending the fiscal support period and adjusting financial incentives, the government aims to attract more chip fabrication companies and further develop India’s semiconductor manufacturing ecosystem.