India clears $2.7 billion Micron chip testing plant ahead of PM Modi's U.S. visit

India's cabinet has approved U.S. chipmaker Micron Technology's (MU.O) $2.7 billion plan for a new semiconductor testing and packaging unit, a senior government source said on Tuesday ahead of Prime Minister Narendra Modi's state visit to the U.S.

The government agreed production-linked incentives worth 110 billion rupees ($1.34 billion) for the plant, which is set to be built in Modi's home state of Gujarat, the Indian official added. He declined to be identified ahead of a planned announcement during Modi's visit.

Cabinet approval was required due to the size of the incentive package, the source added. Micron's plan had been previously reported but not the approval by cabinet.

During his visit, which starts on Tuesday, Modi will meet the chief executives of a number of top American companies, including FedEx (FDX.N) and MasterCard (MA.N), and will be hosted at a state dinner in 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 told.

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.

Sources 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.