LG, Samsung mull setting up semiconductor units in India

South Korean multinational conglomerates Samsung and LG are considering setting up units to manufacture electronic chips in India, following the government's clearance to build two such semiconductor units.

Republic of Korea's Ambassador to India Joon-gyu Lee at a recent event said the Indian government wants to get companies like Samsung and LG, which manufacture semiconductors, to start this operation here as well.

"The companies (LG and Samsung) are considering the Indian request. The problem is Indian style of slow processes," Lee said. No comments were received from the companies.

Last week, the Cabinet approved setting up of two semiconductor units entailing total investments of Rs 63,410 crore. One unit would be set up by a consortium led by Jaiprakash Associates and the other by Hindustan Semiconductor Manufacturing Corporation (HSMC).

In September, the Cabinet had given in-principle nod to the projects.

India does not have a semiconductor plant yet. Semiconductor, or electronic chip, is the main hardware component that is key to the functioning of devices such as mobiles and computers as well as hi-tech defence equipment.

These components are vital for cyber security too as they can used to manipulate functions in a product or for spying purposes.

China already has a wide lead over India as the former has about 100 facilities. Demand for electronic products in India is expected to rise about 10 times to reach USD 400 billion by 2020.

As per market research firm Gartner, Samsung was among top 5 semiconductor companies in terms of revenue in 2012. The worldwide semiconductor foundry market totaled USD 34.6 billion in 2012. Samsung was ranked 5th with market share of 3.7% at revenue of USD 1,295 million.

Israel based Tower Jazz and the US-based IBM, which are investing in India as part of the Jaiprakash Associates led consortium, were ranked 6th and 7th in terms of revenue in global market, as per Gartner.

The consortium led by HSMC has ST Microelectronics and Silterra as partners. Details pertaining to LG's semiconductor business could not be ascertained. India has announced it would provide 25% subsidy on capital expenditure and tax reimbursement under Modified Special Incentive Package Scheme Policy and exemption of basic customs duty for non-covered capital items for companies setting up semiconductor plant(s).

In addition, investing companies will be eligible for 200% deduction on expenditure on research and development under Section 35(2AB) of the Income Tax (IT) Act and investment-linked deductions under Section 35AD of the IT Act.

The government will also provide interest free loan of approximately Rs 5,124 crore to each facility.

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