These FAB units are to be set up by two business consortia namely M/s Jaiprakash Associates Limited (with IBM, USA and Tower Semiconductor Limited, Israel as partners) and M/s HSMC Technologies India Pvt. Ltd. (with ST Microelectronics and Silterra Malaysia Sdn. Bhd. as partners).

The decision to this effect was taken by the Union Cabinet presided over by the Prime Minister Dr Manmohan Singh here on Friday.

The country is facing lot of cyber security problems due to imported semiconductors and chip as the government cannot exercise any control over the manufacturers who are based abroad.

India had sought help from South Korean firms to set up FAB manufacturing facilities in the country.

The South Korean Ambassador to India, Joon-gyu Lee speaking at seminar in Observer Research Foundation a day earlier said : 'India is very keen to get Korean semiconductor factories start operations here.'

“The companies are considering Indian request. The problem is Indian style of slow processes,” he said.

He said semiconductor factories need stable power, stable water and basic components and the companies think that the environment in India is not yet ready. When Samsung started its semiconductor business operations from Xiang in China too, there were problems. But the central and local government did their best to see that the problems are solved.

With finally Posco started moving after 9-year delays, “I am telling the Korean companies that this is the right time to come to India. No Korean company can ignore the Indian market,” the Ambassador said.

He admitted that trade imbalance is a worry but said it can be reduced only by Korean companies starting manufacturing sector in India. This will happen only when licence processes become faster and business friendly, he said.
The Ambassador admitted great potential for cooperation in different fields, including civil nuclear components, defence cooperation, especially shipbuilding, etc. However, the first projects have to move first.

He pointed out that a minesweeping agreement was signed with Korean company Kangnam Corp last year but still it is to go beyond processes. “I don’t know what are the problems. But it is yet to move. Very very slow. Areas like shipbuilding can be taken up after this only”, he said.

He also hoped that with the coming up of Korea’s ambitious Rajasthan Industrial Park, things would start looking brighter and more and more Korean companies will move over here. He said 'right now it is not clear how many companies would participate in the industrial park.'

According to the Cabinet decision the project of M/s Jaiprakash Associates Limited (with IBM, USA and Tower Semiconductor Limited, Israel as partners) will need and investment of Rs 34,399 crore. It will have technology of 90/65/45/28 nm and capacity of 40,000 WSPM. The project will be located at Yamuna Expressway, Uttar Pradesh.

The project of M/s HSMC Technologies India Pvt. Ltd. (with ST Microelectronics and Silterra Malaysia Sdn. Bhd. as partners) will have an investment of Rs 29,013 crore. It will have 90/65/45/28/22 nm technology and a capaity of 40,000 WSPM. The prject will be located at Prantij, Gujarat

Letter of Intent (LoI) will be issued to the two consortia by March 31, 2014. The final agreements are expected to be signed by August 2014. The Empowered Committee of the Government has been authorized to take all decisions to implement the FAB projects in furtherance of the decision.

The proposed FABs will create direct employment of about 22,000 and indirect employment of about one lakh.

These FABs will have a big impact on the development of electronics system design and manufacturing eco-system across the country. This will help set up a critical pillar required to promote electronics system design and manufacturing in India. The semiconductor wafer fabrication units when set up, will stimulate the flow of capital and technology, create employment opportunities, help higher value addition in the electronic products manufactured in India, reduce dependence on imports, and lead to innovation.

The Government has agreed to provide incentives like 25% subsidy on capital expenditure and tax reimbursement as admissible under modified special incentive package scheme (M-SIPS) policy. The FAB units will be exempted from basic customs duty for non-covered capital items. They will get relief from 200% deduction on expenditure on R&D as admissible under Section 35(2AB) of the Income Tax (IT) Act. The FAB units will avail the benefits of investment linked deductions under Section 35AD of the IT Act and get interest free loan of amounting to about Rs 5124 crore.

The Government had in 2011 constituted an Empowered Committee (EC) to identify technology and investors and to recommend incentives to be provided to set up two FAB facilities in the country. The EC had issued a Global Expression of Interest inviting technology providers and investors to set up the FAB facilities. This Committee submitted its recommendations to the Government in March 2013. The Union Cabinet, at its meeting held on September 12, 2013 considered the recommendations of the EC and accorded ‘in-principle’ approval to the two consortia and a package of incentives. The Cabinet also decided that all other FAB manufacturers may also be appropriately and fully apprised of the quantum of subsidy/other benefits/support being offered for establishing FAB facilities in India. Such manufacturers may be asked to indicate their interest / send their responses on specified parameters to the Department of Electronics and Information Technology (DeitY) within a period of four weeks.

As decided by the Union Cabinet, the second Expression of Interest (EoI) was published, which clearly specified the project parameters required as well as the package of incentives being offered by Government of India. 106 potential FAB manufacturers across the world were also directly addressed. No new proposal has been received for setting up of a FAB as per EoI requirements.