Advertisement
X

What Led To Micron’s $2.75 Billion Semiconductor Bet On India? 

By setting up a memory chip assembly and testing unit in Gujarat, Micron becomes the first major global chipmaker to enter India’s nascent semiconductor ecosystem

One of the most important investment decisions that came out of Prime Minister Narendra Modi’s visit to the US is the setting up of Micron’s $2.75 billion semiconductor facility in Gujarat. The proposed chip assembly and testing plant is expected to generate close to 5,000 direct jobs and around 15,000 community jobs once the facility becomes operational.  

Advertisement

US-based Micron, one of the leading names in memory chip solutions, has stated that their plant in India will become operational by late 2024. The proposal for Micron’s plant was approved by the Union Cabinet under the ‘Modified Assembly, Testing, Marking and Packaging (ATMP) Scheme’. 

Micron’s $2.75 billion chip facility will mark the foray of major chip players into India’s nascent semiconductor ecosystem. This is a big achievement for India since the global semiconductor supply chain is largely dominated by a handful of countries. As India tries to make its entry into this strategically critical value chain with the new assembly unit in Gujarat, the reasons that led to Micron’s big bet on India is worth a review. 

The China Factor 

The global chip supply chain is currently undergoing a lot of geopolitical pressure as US and its allied are trying to rein in their dependence on Chinese semiconductor players and its markets. This hostility entered a new phase last month when China’s Cybersecurity Administration handed out a partial ban to Micron. This was the first time that China made a move against a US chipmaker. 

Advertisement

Citing “serious network security risks” from Micron chips, Chinese authorities have prevented its use in strategic and key infrastructure projects. The US government didn’t take this well and its commerce secretary even termed the partial ban on Micron memory chips in China as “economic coercion”. 

With increasing hostility between China and the West, India wants to pose as a favourable investment destination for American and European chip majors who wish for geographical diversification in their activities. The entry of Micron can be viewed as the first success in that direction. 

India's Mega Incentives 

Micron’s arrival in India also marks the first approval given by the Indian government under its $10 billion Indian Semicon programme that was announced in 2021. Under this scheme, Micron will be eligible to receive up to 50 per cent of its total project cost from the Centre. Further, the chipmaker will also receive incentives from the Gujarat government since the assembly and testing facility will be housed in the state.  

Advertisement

Out of the overall estimated project cost of $2.75 billion, the Centre will pay around $1.37 billion on a pari-passu basis i.e. Micron won’t have to wait till project completion to avail the central government’s incentive. Gujarat state government’s financial incentive will cover up to 40 per cent of what the Centre pays i.e. 20 per cent of the overall project cost. 

Although many other countries are also offering financial incentives to woo potential investors in the semiconductor sector, India’s offerings stand out among the rest for its scale and 'equal footing’ basis. “Nobody comes close to this kind of incentives,” comments Satya Gupta, president of VLSI Society of India. Micron will be expected to invest only around $825 million out of the overall $2.75 billion project. 

Big Market 

India also houses a rapidly growing market for semiconductors which will global chip players find very appealing. Out of the overall demand for semiconductor chips, around 30 per cent of the demand is for memory chips, according to industry experts. 

Advertisement

“For companies like Micron, and its ATMP plants, there is a very large market in India,” adds Gupta. India’s semiconductor market was worth about $27 billion, and it is expected to go up to $55 billion by 2026, as per government estimates. By assembling some of its NAND and DRAM memory chips in India, Micron will hope to tap into India’s increasing appetite for memory chips.  

The First Big Step 

For India’s long-term semiconductor vision, the investment announced by Micron is the first big step. With the coming of an ATMP plant, the government will be hoping for more upstream semiconductor activities to take place in the country as well. 

In addition to Micron’s investment, PM Modi’s US visit also secured $400 million from Applied Materials, who plans to set up a collaborative engineering centre in India. Lam Research has also brought out a proposal to train 60,000 Indian engineers through its Semiverse Solution virtual fabrication platform.  

Advertisement

Together, these two moves are expected to help develop a skilled workforce that will enable India to move ahead with its vision of setting up a full-fledged semiconductor ecosystem in the country.  

Show comments