Uttar Pradesh Semiconductor Manufacturing Incentives

The Uttar Pradesh government has recently approved substantial financial incentives exceeding ₹8,500 crore for two major semiconductor manufacturing projects. This initiative is part of the state’s Semiconductor Policy-2024, aimed at encouraging growth and creating employment opportunities, particularly around the Noida international airport. The projects, proposed by Tarq Semiconductors and Vama Sundari Investments, are set to attract an impressive combined investment of ₹32,146 crore.

Project Overview

Tarq Semiconductors, associated with the Hiranandani Group, plans to invest ₹28,440 crore in Sector 28. Their focus will be on producing compound semiconductors, silicon photonics devices, integrated circuits, and optoelectronic components. In contrast, Vama Sundari Investments intends to invest ₹3,706 crore in Sector 10, specialising in display driver integrated circuits and semiconductor assembly.

Employment Generation

The projects are projected to create employment. Tarq Semiconductors aims for 1,000 direct jobs and 10,000 indirect jobs. Vama Sundari Investments targets 3,780 jobs, both direct and indirect. This job creation is vital for the local economy and aligns with the state’s objective of becoming a leader in the semiconductor sector.

Incentives and Benefits

The Uttar Pradesh government has issued Letters of Comfort to both companies, outlining the incentives under the Semiconductor Policy. Tarq Semiconductors will receive a capital subsidy of ₹7,037 crore, alongside a 75% rebate on land costs and 100% exemptions on stamp duty. Vama Sundari Investments has been awarded a capital subsidy of ₹919.31 crore, land rebates, and stamp duty exemptions as well. Additional benefits include a 10-year electricity duty exemption and support for water and power consumption.

Skilling and Development Initiatives

A special allocation has been made for workforce development. This includes annual internships for 500 engineering students and a ₹1 crore talent attraction grant per unit. These initiatives aim to enhance skills in the local workforce, ensuring that the region can support the semiconductor industry effectively.

Strategic Location

The proximity of these projects to the Noida international airport is a strategic advantage. It is expected to facilitate logistics and supply chain management, positioning Uttar Pradesh as important player in India’s semiconductor ecosystem. The readiness of Tarq Semiconductors to commence construction awaits final approval from the central government, which is the last step in the process.

Questions for UPSC:

1. Critically analyse the impact of the Semiconductor Policy-2024 on Uttar Pradesh’s economy.
2. Explain the significance of semiconductor manufacturing in India’s technological advancement and economic growth.
3. What are the potential challenges faced by the semiconductor industry in India? Discuss with suitable examples.
4. What is the role of government incentives in promoting industrial growth? Comment on their effectiveness in the context of semiconductor manufacturing.

Answer Hints:

1. Critically analyse the impact of the Semiconductor Policy-2024 on Uttar Pradesh’s economy.

1. Attracts investment – ₹32,146 crore combined from two projects.
2. Job creation – Directly 4,780 jobs and 10,000 indirect jobs, enhancing local employment.
3. Boosts local industry – Positions UP as a key player in India’s semiconductor ecosystem.
4. Enhances infrastructure – Proximity to Noida international airport improves logistics.
5. Encourages skill development – Initiatives for internships and talent attraction support workforce readiness.

2. Explain the significance of semiconductor manufacturing in India’s technological advancement and economic growth.

1. Foundation of modern technology – Semiconductors are essential for electronics, AI, and IoT.
2. Economic multiplier effect – Growth in semiconductor sector stimulates related industries (e.g., electronics, automotive).
3. Self-reliance – Reduces dependency on foreign semiconductor imports, enhancing national security.
4. Innovation driver – Fosters research and development, leading to technological breakthroughs.
5. Global competitiveness – Positions India as player in the global semiconductor market.

3. What are the potential challenges faced by the semiconductor industry in India? Discuss with suitable examples.

1. High initial investment – Establishing semiconductor fabs requires substantial capital; e.g., TSMC’s multi-billion dollar investments.
2. Skilled workforce shortage – Lack of trained professionals in semiconductor technology hampers growth.
3. Supply chain vulnerabilities – Global chip shortages brought into light risks in supply chain dependencies.
4. Regulatory hurdles – Complex approval processes can delay project initiation and operations.
5. Technological gap – Need for continuous innovation to keep pace with global advancements.

4. What is the role of government incentives in promoting industrial growth? Comment on their effectiveness in the context of semiconductor manufacturing.

1. Financial support – Capital subsidies and tax exemptions reduce initial investment burdens.
2. Encourages private investment – Government incentives attract foreign and domestic investors.
3. Job creation – Incentives linked to employment generation boost local economies.
4. Infrastructure development – Funding for utilities and logistics enhances operational efficiency.
5. Effectiveness example – UP’s Semiconductor Policy-2024 shows potential for economic impact through strategic incentives.