Coimbatore Emerges As Candidate For A Semiconductor Plant: Tata Group And Tamil Nadu Government In Talks Over Potential Investment

The TATA group and government of Tamil Nadu are in talks about the former setting up a semiconductor chip plant in the Coimbatore region.

The context: The Government of India is running a Rs 75,000 crore scheme to promote semiconductor design and manufacturing capacity in India.

-The government's move comes amid the ongoing acute shortage of semiconductor chips, which has caused production processes worldwide to go haywire and prices to jump.

-Demand for chips is likely to be worth around $100 billion in 2025 as against just $25 billion in 2020/21.

-Given India’s reliance on imports, this is seen as a strategic area for local capacity building.

The scheme: Unlike production-linked incentives in other areas, the government intends to support capital expenditure for semiconductor and display fabrication units.

-Semiconductor fab units will get 30-50 per cent of project cost support, display units will get upto 50 per cent of project costs.

-For other products such as sensors, compound semiconductor units and silicon photonics, the government will offer 30 per cent support towards capital expenditure.

-Chip design companies will get 50 per cent of eligible expenditure support from the government. They will also get a product deployment-linked incentive of 4-5 per cent of their net sales for 5 years.

TATA’s take: N Chandrasekaran, TATA group chairman, has said that the group has already gotten into precision manufacturing and related areas in the semiconductor supply chain.

-In addition to Tamil Nadu, the group is also speaking to governments of Karnataka and Telangana regarding setting up semiconductor fab units.

-The group will reportedly invest $300 million to set up an outsourced semiconductor assembly and test (OSAT) plant.

-An OSAT plant packages, assembles and tests foundry-made silicon wafers, turning them into finished semiconductor chips.

-The unit is likely to employ 4,000 highly skilled workers.