Big companies, including a Foxconn joint venture that bid for India’s $10 billion semiconductor incentives, are struggling due to the need for a technology partner, a significant setback for Prime Minister Narendra Modi’s chipmaking ambitions.
India’s high-tech manufacturing push has been a priority for Modi, who is keen to boost jobs and exports as part of his Make in India strategy. But while the government has a range of programs designed to encourage foreign investment, it faces many challenges, especially when attracting advanced technology manufacturers like chipmakers.
A year ago, India received just three applications for a $10 billion scheme that would provide tax breaks and assistance to build fabs — or chipmaking plants. The applications came from a partnership between Indian metals and mining conglomerate Vedanta Resources Ltd and Taiwanese electronics giant Foxconn, a consortium led by Singapore-based IGSS Ventures and a company owned by Europe STMicroelectronics.
But all three proposals have floundered. For example, a Vedanta-Foxconn JV that plans to open a $19.5 billion plant in Gujarat, Modi’s home state, remains in limbo as the partners struggle to find a technology partner to license the manufacturing-grade tech for the 28nm chips they want to produce. The JV has tapped STMicroelectronics for the licensing deal, but talks have stalled over the firm demanding more skin in the game, such as a minority stake in the project.
Meanwhile, a planned $3 billion semiconductor facility in Karnataka, another Modi-beloved state, by chip consortium ISMC that counted Israeli chipmaker Tower as a tech partner has been stalled due to the company’s ongoing takeover by Intel, three people with direct knowledge of the strategy said. One of the sources said that Tower’s management is still in the process of being reviewed by Intel, and its decision to stay on board with ISMC will depend on how things play out in that scenario.
The problems with the projects also reflect broader struggles to attract global manufacturers to invest in India, where labor costs are rising, and local technology needs to catch up to that of established leaders. In the case of the chip plants, the problems also reflect the complexities involved in building a modern semiconductor factory.
India will reopen its incentive program to accept new applications for chipmaking plants. It will extend the application window until December next year, compared with a previous 45-day deadline, the government said. The changes are intended to help revive interest in the program, widely seen as a critical component of India’s efforts to bolster its economy and compete globally with China.
