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Govt to approve semiconductor assembly projects before parliamentary polls

Several semiconductor assembly and packaging projects are expected to be approved by the government before the dates for the parliamentary elections are announced.

Sources said that clearances need to be expedited as the approved projects are entitled for a 50% subsidy by the government on the project cost. Once the election dates are announced the model of code of conduct will come into force and the disbursal will have to wait for a couple of months, which may delay the projects.

Currently four proposals for setting up semiconductor fabrication units and thirteen for setting up compound semiconductor fabs and assembly, testing, marking and packaging (ATMP) units by firms such as Kaynes Technology, CG Power, Foxconn-HCL JV, Hiranandani group, among others, are at the evaluation stage by a government appointed committee. Projects submitted by companies are vetted by the India Semiconductor Mission (ISM), and approved or rejected based upon its recommendations.

Going by the disclosed investments by some of the companies, the proposals add up to around Rs 13,000 crore.

This is over an above the Rs 22,516-crore ATMP project of US-based Micron, which was approved by the government last year and will roll out the first made in India chip by the end of the current calendar year.

“We have submitted our application, which needs to be approved by the government. The moment we have clearances from our prospective technology partners we will share more details with the government,” N Srinivasan, managing director at CG Power and Industrial Solutions, said during the October-December earnings call with analysts.

On Friday, CG Power announced a joint venture with Japan-based Renesas America Inc and Stars Microelectronics (Thailand) Public, for its outsourced semiconductor assembly and test (OSAT) unit. The company is yet to finalise the location of the unit, but is expected to invest $791 million (Rs 6,570 crore) for a period of five years on the project.

Jairam Sampath, chief financial officer at Kaynes Technology, said, “The process of vetting projects for approval is underway. We are quite confident that our proposal would get approved and because general elections are a couple of months away, the approval should happen shortly,” he said.

Kaynes has started preliminary construction work in Telangana for its Rs 2,800 crore OSAT project. “Factory construction has started. So hopefully we will, by end of this year or April next year, have the factory up and running. We have also made arrangements for the equipment,” Sampath said during the quarterly earnings call with analysts.

Kaynes will start regular semiconductor assembly business, which will focus on certain packages which are used in most of the industrial and critical applications. The company said it will then move on to the second stage to what is known as advanced packaging and component semiconductor.

Companies such as Tata group, Tower Semiconductor, are also in fray for setting up semiconductor fabrication units in the country.

On the semiconductor incentives, the government is expected to spend Rs 6,900 crore in FY25, which is nearly five times higher than Rs 1,500 crore estimated spending in FY24.

According to FY25 budgetary estimates, of the Rs 6,900 crore, the government will spend Rs 4,200 crore on ATMP/OSAT projects, Rs 1,500 crore towards fabrication units, Rs 900 crore on modernisation of Semi-conductor Laboratory (SCL), and Rs 300 crore on design linked incentive and display scheme. Financial Express

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