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Incentive scheme designed to attract investments

Posted: 16 Apr 2007     Print Version  Bookmark and Share

Keywords:India semiconductor manufacturing policy  IC design services  electronic-equipment hardware market 

India's long awaited semiconductor manufacturing policy was announced in February, paving the way for the country to make its mark on the global semiconductor map.

Dubbed the Special Incentive Package Scheme, the initiative is focused on attracting investments for setting up semiconductor plants and other technology-manufacturing industries. IC companies seeking incentives—which will be 20 per cent of the capital expenditure during the first 10 years—will have to invest a minimum Rs.2,426.60 crore ($550 million), according to the plan.

While India has a high profile as a software-outsourcing destination for IT back-end and IC design services, the growth of the local electronic-equipment hardware market is expected to accelerate rapidly, according to venture capitalists and leading U.S. chip companies operating in the country.

Tax holidays
According to the policy, participating companies will have to set up in special economic zones to qualify for tax incentives and tax holidays. The subsidy will be in the form of tax breaks and interest-free loans.

The threshold investment limit for manufacturing products such as storage devices, micro- and nanotechnology products and organic LEDs, as well as for assembling such products, has been set at Rs.970.64 crore ($220 million).

Announcing the policy—which will extend through 2010—IT minister Dayanidhi Maran said India can expect more than Rs.44,120 crore ($10 billion) of foreign direct investment.

Maran said the onus is now on global chipmakers like Intel Corp. to decide whether to set up shop or ratchet up activity in India. "We have rolled out the red carpet and are welcoming companies to come and invest in India in semiconductors or other related products," said Maran.

Bright hopes
In February 2006, a joint study by the Indian Semiconductor Association and Frost & Sullivan suggested the country would use Rs.158,832 crore ($36 billion) worth of semiconductors in 2015 and that the chip industry would become one of the nation's largest employers, creating 3.6 million direct jobs and 5.6 million related jobs, with a combined impact of nearly 28 per cent on India's GDP by 2015.

Meanwhile, U.S. and Indian trade officials have discussed a possible easing of U.S. export controls on technology shipments to India.

- Sufia Tippu
EE Times




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