The government is proposing more than $1 billion in cash to each semiconductor firm that begins manufacturing units in the country. Since it looks to put up on its smartphone assembly industry and reinforce its electronics supply chain, two officials said.
Prime Minister Narendra Modi's 'Make in India' drive has aided to turn India into the world's second enormous mobile manufacturer after China. New Delhi considers it is time for chip firms to begin in the country.
"The government will give cash incentives of more than $1 billion to each company which will set up chip fabrication units," a senior government official told Reuters, denied to be named as he was not authorised to talk with media.
"We're assuring them that the government will be a buyer and there will also be mandates in the private market (for companies to buy locally-made chips)."
The procedure to expend the cash incentives has yet to be certified and the government has asked the industry for feedback, said a second government source, which also declined to be identified.
Governments all over the world are subsidising the construction of semiconductor plants as chip shortages hobble the auto and electronics industries and highlight the world's dependence on Taiwan for supplies.
India is also willing to establish reliable suppliers for its electronics and telecom industry to cut dependence on China following border skirmishes last year.
Chips made domestically will be designated as
"trusted sources" and can be used in products ranging from CCTV cameras to 5G equipment, the first source said.
But the sources did not say whether particular semiconductor companies have shown interest in setting up units in India.
PREVIOUS ATTEMPTS
India has formerly tried to persuade semiconductor players but companies were deterred by India's wobbly infrastructure, unstable power supply, bureaucracy and deprived planning.
The rehabilitated government push to lure chipmakers is more expected to succeed, following the success of the smartphone industry, industry insiders say.
Furthermore, Indian conglomerates, such as the Tata Group, have also spoken their interest in moving into electronics and high-tech manufacturing.
India in December invited an "expression of interest" from chipmakers for setting up fabrication units in the country or for the achievement of such manufacturing units overseas by an Indian company or consortium.
The government extended the last date of submission for that appearance of interest to end-March from Jan. 31, given the level of industry demand, the government source said.
An association of investors led by Abu Dhabi-based fund Next Orbit Ventures has shown interest in setting up in India, an auto industry source said.
A shortage of chips is holding back India's auto sector just when it observes early signs of a recovery in demand after sales plunged in 2020 because of the pandemic.
Indian technology ministry officials met executives from the Society of Indian Automobile Manufacturers (SIAM), a leading auto industry body, prior this year to assess car makers' demand for chips, three auto industry sources said on condition of anonymity.
The government estimates it would cost roughly $5-$7 billion to set up a chip fabrication unit in India and take 2-3 years after all the approvals are in place, one of the auto industry sources said.
The source added that New Delhi wants to offer companies concessions, including waivers on customs duty, research and development expenses and interest-free loans.
