New chip policy: 50% subsidy for manufacturing units in Tamil Nadu

In a bid to attract the chip-makers which have been chosen under Centre’s $10 billion chip subsidy plan, Tamil Nadu government on Sunday offered provide a capital subsidy of up to 50% of the capex assistance provided by the Centre for the semiconductor manufacturing units to be set up in the state.

The companies that have received approval from Centre for financial assistance under the semiconductor schemes will be eligible to avail the structured package of incentives for semiconductor manufacturing, Tamil Nadu government said in its Semiconductor and Advances Electronics Policy 2024, released at the Global Investors Meet 2024 on Sunday.

The semiconductor project selected by the Centre if sets up its manufacturing unit in Tamil Nadu, will also be eligible for more incentives to train personnel, stamp duty, land and electricity concessions.
The state government will reimburse 50% of the expenditure incurred for the project, up to a maximum of Rs 1 crore for the investment period, for in-house R&D related to patents, copyright, trademarks, and geographical indications registration. An interest subvention of 5% as a rebate in the rate of interest shall be provided for actual term loans taken to finance the project.

“Prototyping is a crucial stage before commercialisation wherein the project company can test the design and identify errors if any before . To encourage prototyping within the state, eligible units will be provided with a subsidy of 25% of the capex for establishing product testing and prototyping facilities, subject to a ceiling of Rs 1 crore,” the policy said.

Semiconductor manufacturing will be treated as sunrise sector under the Tamil Nadu Industrial Policy 2021. In anticipation of approval from the Centre for semiconductor manufacturing, the companies with project proposals in semiconductor manufacturing may apply to the industries, investment promotion & commerce department of Tamil Nadu government for sanction of incentives. However, the disbursal of incentives shall be subject to the approval and subsequent receipt of financial assistance from the Centre, it said.

Besides, the structured package of incentives for advanced electronics manufacturing will be applicable for new and expansion projects in the state with investments made from January 1, 2024. The companies should meet a minimum investment threshold of Rs 200 crore and minimum employment threshold of 150 jobs for the initial Rs 200 crore investment, according to the policy.

Further, for every additional Rs 50 crore of investment, a minimum of 35 jobs should be generated. The minimum investment and employment threshold must be met by the units within the standard investment period of four years. Additionally, the companies must commit to a minimum of 20% in-house or unit level value addition from the manufacturing facility.