News & Analysis

India a Chipmaker’s Destination

At least that’s what the government says at a time when the Vedanta-Foxconn deal is raising a few eyebrows as both have zilch experience in microprocessors

At a time when India’s dreams of becoming a global semiconductor hub took a severe beating due to the lack of technology partners, the government appears to be doing damage control of some sorts by reopening the window for new applications for chipset fabrication units. Of course, the official position remains that this was necessitated by feedback from participants. 

Before getting to these changes, let’s look at what actually transpired thus far on the journey. Having enthusiastically supported the Vedanta Group’s processed chip making collaboration with Hon Hai Precision Industry (Foxconn), the government is having second thoughts as it may reject providing incentives. The absence of a technology partner is the stated reason. 

Post the euphoria, there isn’t much progress

Given the abject lack of experience in semiconductor technology, the government is obviously nervous about footing half the bill for setting up the plant as the combination hasn’t managed to find a technology partner or a license for manufacturing-grade technology. At the moment, neither of these seem to be forthcoming. 

And if that isn’t bad enough, A $3 billion proposal involving Israeli Tower Semiconductor also stalled. A third plan hasn’t got going because Singapore’s IGSS Ventures is looking to submit its application once again seeking incentives. Which is why, we believe that the government has gone back and opened the same window to let in some fresh applications. 

However, the government has set its aim high

On his part, technology, railways and telecom minister Ashwini Vaishnaw appears confident that that would be on track, or that it never went off them. In an interview published in ET, he says the decision to reopen the windows was based on suggestions from experts who are part of the government’s India Semiconductor Mission. 

The minister said experts felt that since 60% of the global demand was for mature nodes and the rest for advanced nodes, it was decided to cover the entire spectrum and not limit the program to only 28 nm and smaller nodes. This got modified last October, though the same was not applicable to the first three applicants as that process closed on February 15. 

In other words, the government wants to invite fresh bids for the whole spectrum of nodes that find use cases in electric vehicles, telecom, consumer and power industries, specialized chips and smartphones, and systems with heavy computing demands. The minister says the original three (named above) can migrate to the new plan. 

Govt. opens up the entire microchip spectrum

The minister revealed that during his meetings with companies in the US, he was advised to focus on creating the ecosystem whereby those providing 200 to 250 gasses and chemicals requiring high levels of speciality, purity and precise composition were available locally. “We have focused on the quality of electricity, getting the logistics right and making sure that the talent for semiconductor fabrication is in place,” Vaishnaw said. 

Referring to the existing proposals, the minister said a team of technical and financial experts were evaluating every proposal and that some information could be forthcoming over the next three to four weeks. Our sources tell us that things would stabilize only if the interested parties can find the technology knowhow or a partner who has the chutzpah. 

There’s still some way between the cup and lip

While all of this is being processed, the fact remains that on the ground Tower could be awaiting a formal acquisition by Intel before re-entering the race. And while the others wait, there has been reports of how the Tata Group could end up becoming an iPhone manufacturer while also entering the chipmaking space, if one were to believe what N Chandrasekaran told Nikkei some months ago. 

While all of this keeps the pot boiling, the government has reiterated its commitment to raise more funds if required to turn the dreams into reality. The minister says thoughts of raising the $10 billion incentive would be taken once the limit is breached. 

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