India is to offer microchip makers incentives including tax breaks and subsidies to set up factories, a policy the industry welcomed yesterday to lure global giants and turn the country into a chip manufacturing hub.
"The policy will go a long way in making India an attractive destination for global semiconductor and hi-tech companies," said Poornima Shenoy, president of the Bangalore-based India Semiconductor Association.
The blueprint, unveiled in New Delhi on Thursday by Information Technology and Communications Minister Dayanidhi Maran who estimated it will attract up to US$9 billion of investment, will spur rapid growth of India's entire electronics industry, said Shenoy.
She estimated India's electronics market will expand to US$363 billion by 2015, from US$28 billion last year.
Demand for chips that go into products ranging from mobile phones, liquid-crystal-displays and smart cards to personal computers and automobiles will reach US$36 billion by 2015, a compelling case for chip manufacturers to set up factories in the country to tap the local market, Shenoy said.
"There are at least two major multinationals looking to invest in India as well as local manufacturers," she said. "We see investment not just in chip manufacturing but also in the entire electronics eco-system."
The policy is aimed at turning the country from a designer of chips into a manufacturing base in competition with the likes of China, Singapore and Taiwan, that have long promoted the semiconductor industry.
"This will pave the way for high-end capital intensive IT manufacturing," said Vinnie Mehta, executive director of the Manufacturers Association of Information Technology, in a statement.
The policy will enable the "industry to graduate from the current assembly-oriented operations to deep and competitive manufacturing capabilities."
Globally, the microchip industry is worth an annual US$240 billion, according to the India Semiconductor Association. India has 11 non-commercial chip fabrication units, or fabs, focused on defense and aerospace.
India is already a software powerhouse, with exports set to climb 32 percent in the year ending March to US$32 billion. But the country's high-tech manufacturing hasn't kept pace.
Microchips "form the heart of hardware and soul of software in any electronic system," said Rajendra Kumar Khare, an electrical and electronics engineer who heads technology start-up firm Indusedge.
"Cultivation of a robust and scalable semiconductor industry is the key to making the great electron revolution happen," he added.
Besides chipmakers, manufacturers of such products as liquid crystal and plasma display panels, storage devices, solar cells and photo voltaics will be eligible for the incentives, valid for the first 10 years of operations.
As part of the policy to push microchip manufacturing, the government also promised interest-free loans for subsidizing capital expenditure incurred in setting up chip manufacturing units.
The finiancial incentives will be valid for the initial 10 years of operations.
The incentives may prove to be a magnet for chip industry giants such as Intel Corp, Advanced Micro Devices Inc, Infineon Technologies AG, IBM Corp and Toshiba Corp, according to the Economic Times.
Intel has already invested US$1.7 billion in India, where it is engaged mainly in research and development and has no manufacturing base.
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