State governments jostle for electronics manufacturing clusters
State governments are showering incentives and schemes for the electronics and semiconductor companies to invest in their regions.
The two consortiums, one including IBM, and the other, STMicroelectronics, are looking to build the foundries in Noida and Gujarat, after the Government of India gave their plans in-principle approval late last year.
Various state governments, including Madhya Pradesh, Andhra Pradesh, Maharashtra, Orissa, Kerala, West Bengal and Karnataka are acquiring and allocating specific land for electronics manufacturing clusters (EMCs). They are also offering tax exemptions, simplifying clearance procedures, setting up incubation centres or granting subsidies in investments. Sanjeev Keskar, chairman of the India Electronics and Semiconductor Association said, “Policies are in place and most of the states are going after developing world class manufacturing clusters.”
The government of Andhra Pradesh, for example, is offering 10% subsidy on capital equipment for technology upgrade and 25% subsidy on lease rentals of up toRs5 lakh a year for three years. “We are among the first states to receive inprinciple approval for EMC, we would be soon working on the second phase of the plan. We are offering infrastructure and fiscal support over and above the commitment made by the central government,” a senior government official said from the state.
Kerala is readying around 75 acre of land under EMC. Karnataka is setting up an incubation lab in partnership with Indian Institute of Information Technology, Bangalore. It announced getting approval for an EMC in Electronics City and is investing over Rs85 crore in the project.
Punjab is looking at reducing the value added tax burden for the companies in EMCs, while the government of Madhya Pradesh is offering over 75% rebate on investments. “It is a healthy competition, but what how various state governments can differentiate and increase the attractiveness is by building their competency around a class of products. Fab is just the M of the entire electronics semiconductor and manufacturing industry, and there are about 25 categories of products in electronics,” said PVG Menon, president of IESA. “Rajasthan for example has become a belt for energy metering, and would attract more companies in that space.”
Last week, the department of electronics and information technology (Deity) announced to have received over Rs65,000 crore of investment proposals for the development of manufacturing and design of semiconductor chip in the country, including the two semiconductor foundries. In September, India approved setting up two consortiums for silicon wafer fabrication units in the country.
This in-principle approval was issued to Jaiprakash Associates, IBM and Tower Jazz of Israel, who plan on building one fab in Noida, and ST Microelectronics, Hindustan Semiconductor Manufacturing Corporation (HSMC) and Silterra of Malaysia, which chose State of Gujarat. The fabrication units will produce 40,000 wafer starts per month of 300 mm size.
The central government is offering incentives and exemptions covering up to 40% of the overall cost for setting up the fab, which is estimated to be around $4-5 billion (Rs25,550 crore) of investment.