In affirming the policy announced last month, the government said it will now reopen negotiations with Intel Corp. and other chip makers about setting up manufacturing facilities here. Earlier, Intel opted for Vietnam during the lengthy delay in delivering the Indian semiconductor manufacturing policy.

As many as three chip manufacturing plants are possible here at a cost of $3 billion each as a result of the policy announcement, said Dayanidhi Maran, federal minister for communications and information technology. The ministry is now forming an appraisal committee that will review manufacturing proposals and pass on its recommendations to the government, according to press reports here on Thursday (March 22).

India's chip policy offers incentives like tax breaks and interest-free loans of up to 20 percent of total capital expenditures incurred in the first ten years of manufacturing. To qualify for the incentives, a minimum investment of about $550 million will be required for chip makers. For other products such as storage devices and displays, a minimum investment of about $225 million will be required.

Four fabs have been announced, but work has commenced on only two. The government's actions will give officials at the two planned fabs access to the details of the manufacturing policy, sources said.

Meanwhile, the government said it will support three fabs with tax breaks and other incentives along with as many as 10 electronic product manufacturers on a first-come, first-served basis. The first three chip makers investing a minimum of $550 million and approved by the appraisal committee would be eligible for the government incentives.

The appraisal committee will look at several factors in recommending projects, including the type of technology being used and the ability of the proposed manufacturers to acquire necessary financing for their projects, according to Rajendra Khare, chairman of the India Semiconductor Association.

With the release of more details about India's chip policy, more announcements about fab and electronics manufacturing projects are expected soon. Khare said it is likely that the cost of used chip manufacturing equipment likely to be installed in some new fabs will not qualify as part of total project costs. Only new equipment will qualify, he added.