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When Dataquest asked for a probable time for the announcement of the Semiconductor Policy, the Minister of Communications and IT, Dayanidhi Maran, on Feb 8, 2008 at the Nasscom Press Conference, was all smiles. He had then said: "We will announce the policy before the budget." He has kept his word, announcing the policy on February 23. The announcement comes after the cabinet at its meeting on January 11, in principle approved the proposal of the Department of Information Technology regarding the special incentive package scheme for attracting investments for setting up semi fabrication and other micro and nanotechnology manufacturing industries in the country. The announcement assumes significance in the light of the fact that chip giant Intel, frustrated at the constant delays in announcement of a fab policy, chose to set up its plant in Israel. Announcing the policy, Maran said the country could expect an FDI to the tune of $10 bn.

Announced in a Hurry?
The industry in general is excited but details are difficult to come by. Even after about 20 days after the announcement, the complete policy document continues to elude all, specially the semiconductor industry.

The overall reaction of the industry to whatever details about the policy is available, is of cautious optimism. Nobody Dataquest spoke to had any clue about the complete policy or the time of its being made public. In response to a mail, Poornima Shenoy, president of the India Semiconductor Association says, "This policy is extremely positive. The policy will provide an impetus for further growth of the sector, the electronics industry and the overall ecosystem. We are keenly awaiting the details on the policy."

The Details
As per the policy, the threshold NPV of investments would be Rs 2,500 crore for semiconductor manufacturing (Wafer Fab) products while the threshold NPV in manufacture of other products would be Rs 1,000 crore. The policy also mentioned that if a unit is located in a SEZ, the incentive would be 20% of the capital expenditure during the first 10 years. For those units located outside the SEZ, the incentive would be 25% of the capital expenditure during the first 10 years and counter-veiling duty on capital goods would be expected.

The incentive applies to the manufacturer of all semiconductors, displays including Liquid Crystal Displays (LCDs), Organic Light Emitting Diodes (OLED), Plasma Display Panels (PDP), and any other emerging displays, storage devices, solar cells, photo voltaics, other advanced micro and nano technology products, assembly and test...

	"This policy is extremely positive. The policy will provide an impetus for further growth of the sector, the electronics industry and the overall ecosystem. We are keenly awaiting the details on the policy"
	-Poornima Shenoy, president, India Semiconductor Association

The Outlook
Though overall reactions to the policy have been positive, there is a feeling in the industry that the policy could have been more forthright. According to Jaswinder Ahuja, managing director, Cadence Design, "The incentive package that the government has announced is relatively lower than what other countries have been offering to attract semiconductor manufacturing as a strategic national priority. I hope that the huge demand opportunity that India presents offsets this in the business plan analysis of prospective investors. Rajeev Mehtani, vice president and managing director, NXP Semiconductors India adds, "In itself, the policy is not a very generous one. However, coupled with the fact that the Indian consumption patterns are expected to rise very fast, this policy will go a long way in helping develop a local manufacturing ecosystem.

With Gartner arguing that there will be overcapacity and saturation in the semiconductor market by 2009, it would be interesting to see how things shape up in the coming months. Talking about the potential, the ISA–Frost & Sullivan 2006 report mentions that semiconductor requirement in India in 2015 will be to the tune of $40 bn-plus and if India could manufacture a large percentage of this in India, the total electronics equipments consumption would be about $350 bn.

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