Cabinet OK’s ₹3300cr chip assembly plant in Gujarat

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Last Updated04/09/2024

The Union Cabinet Monday cleared a semiconductor assembly and testing plant being set up by Kaynes Semicon at a cost of Rs 3,300 crore.

On Monday, the Union Cabinet approved the establishment of a new semiconductor assembly and testing plant by Kaynes Semicon, marking a significant step in India’s push to become a global semiconductor hub.
The plant, which will be located in Sanand, Gujarat, represents a ₹3,300 crore investment and is the fifth semiconductor unit to receive Cabinet approval under the government’s ambitious ₹76,000 crore chip manufacturing incentive scheme.

The new facility, with a planned capacity of 6 million chips per day, will cater to a wide array of applications, including industrial, automotive, electric vehicles, consumer electronics, telecom, and mobile phones.
The Ministry of Electronics and Information Technology (MeitY) announced that the plant would receive a government subsidy of approximately ₹1,300 crore.
The decision to establish the plant in Sanand, Gujarat, comes after initial plans to locate it in Telangana were revised.
Sanand is emerging as a key cluster for semiconductor assembly plants in India, a strategic move that aligns with the government's vision of turning the country into a major semiconductor hub akin to the United States, Taiwan, and South Korea.

India’s semiconductor initiative is part of a broader strategy to reduce reliance on imports and become a leading player in the global semiconductor supply chain.
This effort includes the approval of a $11 billion fabrication plant by Tata Electronics in partnership with Taiwan’s Powerchip and three additional assembly plants by Tata, US-based Micron Technology, and Murugappa Group’s CG Power in partnership with Japan’s Renesas.
Future proposals under consideration include a ₹78,000 crore fabrication plant by Israel’s Tower Semiconductor and a ₹4,000 crore assembly plant by Zoho.

With nearly all of the initial $10 billion in subsidies under the semiconductor manufacturing incentive policy committed, the government is preparing to launch the second phase of the scheme.
This phase is expected to increase the program’s outlay to $15 billion and will include several key changes:
Reduced Subsidies: The capex subsidy for assembly and testing plants will be reduced from the current 50% to 30% for conventional packaging technologies and 40% for advanced packaging technologies.
No Technology Transfer Support: The new scheme will not cover technology transfer costs, meaning companies will need to finance these expenses independently.
Ecosystem Support: The government may offer capital equipment and ecosystem support, including gases, chemicals, and raw materials essential for chip manufacturing.
Micro-LED Fabrication: Incentives for the fabrication of micro-LED displays are also being considered under the new scheme.

Despite the progress, there have been challenges. Micron Technology’s ATMP plant in Sanand is reportedly 133 days behind schedule due to difficulties in hiring sufficient construction personnel.
Additionally, Tata has requested an exemption from demonstrating the capability to manufacture 28-nanometer chips to secure fiscal support, a request that the government is still evaluating.