Semicon 2.0 Guidelines Restrict Sale of Chip Plant Assets Before Commercial Production

The government has set an incentive outlay of ₹1.27 lakh crore under Semicon 2.0 as it works to expand the semiconductor ecosystem in India, as per news reports. 

The scheme guidelines put conditions on companies receiving support, including restrictions on project assets and requirements around ownership and continued commercial operations. 

Chip Plant Assets Cannot Be Disposed of Early 

Companies with approved chip projects will not be allowed to sell or dispose of project assets, or create a mortgage, lien or charge over them, until commercial production of the entire project is declared. 

Transactions in the ordinary course of business are excluded from the restriction. Other cases require prior approval from the Nodal Agency. 

Six Areas Covered Under Semicon 2.0 

Semicon 2.0 has six pillars covering semiconductor design, machines and materials, new fabs, ATMP and OSAT, research and development, and talent development. 

Guidelines have so far been issued for machines and materials, setting up more fabs, and further strengthening the ATMP and OSAT industry. 

Three-Year Production Requirement 

Units receiving fiscal support will have to remain in commercial production for at least three years from the date the entire project begins commercial production. 

Applicants under the machines and materials pillar can also receive PLI benefits for components and sub-assemblies produced through domestic sourcing in India. 

Ownership and Investment Conditions 

The applicant and its promoter or group must maintain at least 51% equity ownership and equivalent voting rights in the project company throughout the fiscal support agreement, including the three-year operating period. 

The controlling entity must be identified when applying for support, while any change in shareholding during the specified period must be reported to the Nodal Agency. 

Certain costs, including land development, temporary facilities, technology transfer, interest during construction and R&D, will not qualify as eligible capital expenditure under the scheme. 

Read More: Moody’s Revises India FY27 GDP Growth Forecast To 7%, Citing Economic Resilience! 

Conclusion 

Semicon 2.0 combines financial support with conditions on how approved projects are operated and funded. The guidelines require supported chip projects to remain operational for at least three years while limiting the disposal or encumbrance of project assets before full commercial production. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.  

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