Government Incentives Sought by Micron Suppliers as Chip Manufacturing Beckons in India by 2024 End

Government Incentives Sought by Micron Suppliers as Chip Manufacturing Beckons in India by 2024 End

The Minister of State for Electronics and Information Technology, Rajeev Chandrasekhar, has announced that the government plans to offer incentives to certain businesses. However, individual state governments will have the option to provide incentives as well.

By December 2024, Micron plans to start manufacturing chips in India. Therefore, the company’s supply chain partners are trying to establish co-location facilities here and are searching for incentives.

“We are assessing and putting together plans for another co-location investment with Micron (in India). The most crucial factor is if we continue to have the same amount of assistance from the government, according to Simmtech’s chief customer officer, Jeffery Chun.

He continued that the government should see its effort as a component of the complete supply chain rather than a stand-alone initiative.

Micron would require assistance from its supply chain partners, including Singapore’s Kulicke & Soffa, South Korea’s Simmtech, Japan’s Disco Corp, and France’s Air Liquide, to start operations at its chip assembly and packaging business. They will offer cutting-edge machinery, tools for processing and grinding, and ultra-pure gases.

Rajeev Chandrasekhar, the Minister of State for Electronics and Information Technology, has announced that the government will offer incentives to certain businesses. The state governments would have the freedom to do so, though. “The administration won’t discuss it, but certain state governments may promise to add on and offer incentives. Chandrasekhar continued that state governments may provide auxiliary businesses with land, water, and energy support to entice them to create a supply chain.

Simmtech creates goods such as substrates for semiconductor chip assembly and module-printed circuit boards (PCBs) for semiconductors’ memory expansion. Before beginning chip manufacturing and packaging, Micron would need such equipment to launch its operations and teach its engineers.

“We will first establish a training facility here before establishing manufacturing. In reality, Micron has already purchased a plant, and to offer the necessary equipment in the shortest amount of time, we have solicited the assistance of our partners (including Disco Corp.), according to Gursharan Singh, senior vice president of global assembly and test at Micron Technology.

To establish its assembly, testing, marking, and packaging (ATMP) business in Sanand, Gujarat, the corporation has pledged to invest $825 million. The Gujarat government would provide incentives worth 20% of the project’s entire cost to Micron, while the Centre will provide 50% fiscal assistance for the project’s $2.75 billion overall cost.

“We will position ourselves to help develop the semiconductor ecosystem in India,” said Raja Vinay Singh, head of business development for significant enterprises at Air Liquide. Utility companies like Air Liquide should be considered an ecosystem component, and we should also be eligible for the full advantages of capex subsidies.

Singh continued, “We are looking at land allocation near semicon players, uninterrupted power supply, the right-of-way concerns and power transmission, and speedy connection to the grid.

Micron also seeks to establish local alliances in locations where it sees a chance to localize the supply chain.

Along with rewards, Micron’s partners have requested government assistance in locating qualified semiconductor workers.

Micron Technology, the leading global player in the memory and storage solutions industry, has been intensifying its efforts to diversify and expand its manufacturing capabilities in various parts of the world. In line with this strategy, the company is set to establish its chip production facilities in India by the end of 2024. As Micron gears up for this substantial expansion, its suppliers, who are integral to the semiconductor supply chain, are now seeking government incentives to support Micron’s groundbreaking initiative.

Micron’s decision to invest in India is part of its strategy to manage risks related to a concentrated supply chain, especially given the current geopolitical tensions and the global shortage of chips. This shortage has severely affected various industries, including automotive, consumer electronics, and telecommunications, emphasizing the importance of diversifying chip production locations.

India’s potential in the semiconductor industry is gaining recognition with its robust digital infrastructure, extensive talent pool, and the government’s proactive policies towards digitalization and manufacturing. With the increasing demand for electronics and the country’s vision to become a global electronics manufacturing hub, Micron’s entry could potentially boost India’s standing in the worldwide semiconductor supply chain.

Micron’s suppliers are crucial in chip manufacturing, providing vital materials, equipment, and services. To establish a fully functional production unit in India, they must set up local operations involving substantial financial investment and risk.

These suppliers seek government incentives to offset the initial capital expenditure and operating costs and help manage the risks associated with new facilities. This includes tax breaks, subsidized electricity and water rates, and unique economic zone benefits, among other things.

The benefits sought are with precedent. Several countries, including the United States, China, and Taiwan, have provided incentives to attract semiconductor manufacturing, understanding its strategic importance and economic benefits.

The Indian government has shown proactive measures towards attracting foreign investments in the electronics and semiconductor sectors. The Production-Linked Incentive (PLI) scheme, aimed at boosting domestic manufacturing and exports, is one such initiative.

However, the suppliers argue that the current incentives are skewed towards end-product manufacturers and assemblers. They have appealed for a more balanced approach that incentivizes suppliers who form an integral part of the chip manufacturing ecosystem.

The road ahead for Micron’s suppliers and the Indian government is fraught with negotiation and compromise. This move could herald a new era for India’s semiconductor industry, offering enormous potential for economic growth and technological advancement. India has a great chance to join the worldwide semiconductor supply chain, while Micron and its suppliers can benefit from India’s abilities.

With strategic government incentives and support, the country could pave the way for more semiconductor manufacturers to set up facilities, thus propelling India towards its goal of becoming a global electronics manufacturing hub. In this context, the steps taken by Micron’s suppliers and the Indian government’s response will be keenly watched by industry observers worldwide.