India Approves $2.7 Bn Micron Chip Testing Plant Ahead Of Modi's U.S. Visit

Prior to Prime Minister Narendra Modi's state visit to the US from June 21-24, at the invitation of President Joe Biden and First Lady Jill Biden, the Union Council of Ministers passed Micron Technology's (MU.O) $2.7 billion plan for a new semiconductor testing and packaging unit, a senior government source reported to Reuters on Tuesday.

The Indian official added that incentives tied to an output of 110 billion rupees ($1.34 billion) were agreed upon by the government for the project, which is slated to be constructed in Gujarat. Prior to a scheduled announcement during Modi's visit, he declined to be named.

Cabinet approval was required due to the size of the incentive package, the source stated to Reuters.

Modi's visit to the United States, which begins on Tuesday, will include meetings with the CEOs of many leading American corporations, including FedEx (FDX.N) and MasterCard (MA.N), as well as an invitation to a state banquet at the White House on June 22.

Micron Technology's plans come as the White House presses U.S. chip companies to invest in India with talks ongoing about possible further investments, U.S. administration officials reported to Reuters.

Biden wants domestic companies to decrease the risks of doing business in China while better integrating the U.S. economy with that of the world's largest democracy, one U.S. official said.

The source added that Micron's India plant would boost Modi's vision of making India a semiconductor base but true success would require actual manufacturing.

Reuters reported this month that three big companies, including a Foxconn joint venture, that bid for Indian semiconductor incentives were struggling due to the lack of a technology partner.

The Biden administration was enraged when China announced in May that Micron had failed to meet safety standards and prohibited operators of critical domestic infrastructure from acquiring equipment from the largest memory chipmaker in the United States. According to a source in the Indian business who is acquainted with Micron's clearances, Assembly Testing Marking and Packaging would be constructed in Sanand. Such facilities do not produce semiconductor chips; instead, they test and package them. At the facility, Micron may obtain and package chips for customers, or other businesses might send their products for testing before shipment.

The Micron deal "helps the vision but not in a phenomenal way because still the major part of puzzle lies in setting India as a semiconductor base," said the industry source to Reuters.

From June 21 to 24, Prime Minister Modi will be in the US at the invitation of President Joe Biden and First Lady Jill Biden. On June 22, they will welcome Modi at a state supper. A speech before the joint conference of the US Congress on June 22 is also part of the visit.