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Cabinet clears Tower Semi, STMicro chip investments

This could narrow the electronics trade deficit while creating opportunities for downstream units

The Cabinet yesterdaygave in-principle approval to the proposal for setting up two chip fabrication units in the country, Information and Broadcasting Minister Manish Tewari told reporters after a meeting of the Union Cabinet, chaired by Prime Minister Manmohan Singh.

The move will foster the manufacturing of indigenously designed and manufactured chips, cutting the country's dependence on imports.

The government took the decision after considering proposals from two consortia. One was led by Israel's TowerJazz and the other was led by Geneva?based chipmaker STMicroelectronics.

Israel-based foundry chipmaker Tower Semiconductor Ltd, which operates under the brand name TowerJazz, partnered with IBM and Indian infrastructure conglomerate Jaypee Associates to build and operate a 300mm chip facility in India. STMicroelectronics partnered with Hindustan Semiconductor Manufacturing Corp. (HSMC).

Both STMicroelectronics and the consortium comprising IBM had indicated earlier that they would initially invest over Rs 250 billion each, two government officers familiar with the development had told Times of India

"The Cabinet has also given in-principle approval that incentives given to these players will be offered to other players interested in setting up semiconductor plant here" according to Telecom Minister Kapil Sibal. "Incentives...are already covered under existing policies, which account for about 62 per cent, and the balance 38 per cent is in form of loan provision, which is refundable. The burden on government will be only interest charges".

India currently consumes close to $7 billion of semiconductor products every year. By 2020, when the total ESDM market is expected to reach $400 billion, this consumption is expected to rise to touch $55 billion. With the location of a fab in India, the country could reduce its deficit in electronics, and partially reduce the very high supply chain risks that India is exposed to, without an alternate source for procurement.

Aninda Moitra, President & Managing Director of Applied Materials India, told EETimes India: "Setting up of such a high value manufacturing industry as semiconductor chip fabrication will have truly transformative effect, on the overall electronics industry. This will have a very strong multiplier effect that will result in major strides forward in the value generated from all sectors within the semiconductor ecosystem".

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