India debuts fab incentive policy

By Colleen Taylor -- Electronic News, 2/22/2007

The India Semiconductor Association (ISA) today unveiled a new semiconductor policy designed to attract further investments in the country.

The policy unveiled today by the Bangalore-based association has a special incentive package to attract investments for setting up semiconductor fabrication and other micro and nano technology manufacturing industries. The ISA said the incentives will be for the manufacturer of all semiconductors, displays including LCDs, organic light emitting diodes (OLED), plasma display panels (PDP), and any other emerging displays, storage devices, solar cells, photo voltaics, other advanced micro and nano technology products, and assembly and test.

Under the policy's terms for wafer fab products, the threshold net present value (NPV) of investments would be $566.2 million (2500 crore Indian rupees.) The threshold NPV of investments in manufacture of other products would be $226.5 million (1000 crore Indian rupees.)

The policy also indicated that if a fab is located in a designated special economic zone (SEZ), the incentive would be a direct investment from the government of 20 percent of the company's capital expenditures within its first 10 years of operation. For a unit located outside a SEZ, the incentive would be a 25 percent investment of the capital expenditures within its first 10 years.

"This is extremely positive. The policy will provide an impetus for the further growth of the sector, the electronics industry and the overall ecosystem," Poornima Shenoy, the president of the ISA, said in a statement. "This policy will go a long way in making India as an attractive destination for global semiconductor and hi-tech companies plus investors."

The new policy may change the projected course of the fab market in India, which was expected to slow down in 2007 according to some market research firms' predictions at the end of last year. While it is making moves to increase fab interest in India, the subcontinent has already long been a leader in semiconductor design services. According to a recent ISA-Frost and Sullivan report, the $3.25 billion semiconductor design services market in India is forecasted to reach $14.4 billion by 2010.