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Gujarat and U.P. to house semiconductor plants

Government will hold a 11% stake, technology providers will hold 10%

Two semiconductor chip manufacturing units, with a combined investment of Rs 515.50 billion and enjoying a government subsidy, are likely to be operational in India in two years time

One of them is likely to come up in Greater Noida (UP), and will be built and operated by a consortium led by Jaiprakash Associates in association with IBM Microelectronics, and with Tower Jazz as the system integrator, The outlay of this fab would be about Rs 263 billion.

The other plant is likely to be in Gujarat state. It is led by Hindustan Semiconductor Manufacturing Corporation with French firm ST Microelectronics and Silterra (Malaysia) providing the technology. The outlay of this proposed fab is about Rs 252.5 billion

Government will hold 11% stake in each project, while the technology providers are required to hold a 10% stake. The Government is yet to work out details of the subsidy the projects will enjoy. Subsidy will depend on the detailed project report to be submitted by the two consortia.

Communications and IT Minister Kapil Sibal said setting up of chip facilities would be strategic importance as chips have security implications. At present over 90 per cent of the domestic requirement of semiconductors is met by imports.

Sibal said that the about 60 per cent of incentives approved by Cabinet are already covered under existing policies. In addition to this, the Finance Ministry has agreed to give them status under section 35 AD of the I-T Act which means the capital investment amount will be set off against profit.

"They will be given interest free loan. This along with recognition under 35 AD will constitute the balance 40 per cent of incentives to be provided to them" Sibal said. Also, the loan amount given to the companies will be converted into 11 per cent equity in these projects

Out of 16 expressions of interest received by the government, only two have shown seriousness, the Minister said.

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