PremiumNEW DELHI : The International Semiconductor Consortium’s (ISMC’s) proposed $3 billion chip fab in Mysuru is likely to start construction as early as February if the central government okays the company’s application for financial incentives.
ISMC is one of the three consortia shortlisted by the Centre to be eligible for the incentives. The three proposals for wafer fabs worth $13.6 billion have sought government support to the tune of $5.6 billion.
“We will probably become the first state in India to have a semiconductor fab. ISMC has the technology and the capability. Subject to the central government’s approval, we hope to see work starting on this plant from February," Karnataka minister for information technology, electronics, and skills development, Dr. C.N. Ashwath Narayan, said in an interview.
He added that ISMC would make 40-65 nanometre (nm) analog chips to “cater to the defence and automotive sectors, and then to other areas".
The minister said he expects the semiconductor foundry to take four years to build, “but it can happen earlier too".
As the world battled chip shortages that crippled industries during the pandemic, India offered chipmakers incentives, including financing as much as half of the project cost, to build a fab ecosystem in the country and cut its reliance on China.
The US decision to impose sweeping restrictions on the sales of semiconductors and chipmaking equipment to China is also encouraging companies to consider India as an alternative destination.
While India has expertise in designing chips, the absence of semiconductor fabs means it has to rely on imports for all its chip requirements.
Local policymakers hope the design capabilities of Indian companies will also attract companies to set up chip plants in India.
“The strength of Karnataka is design, where we are No.2 in the world. From chip designing, we now want to become a chipmaker," Narayan added.
ISMC is a joint venture between Abu Dhabi-based Next Orbit Ventures and Israel’s Tower Semiconductor, which was acquired by Intel Inc. this February (the deal closes early next year).
“Reliance Industries and the HCL group have cumulatively invested about 15% in the project," a person familiar with the deal said on condition of anonymity, but neither company has confirmed the development so far.
Israel-based ISMC Analog Fab Pvt. Ltd is expected to make 65 nm analog devices, said the person cited above.
Pure-play foundries such as Tower Semiconductor, Taiwan Semiconductor Manufacturing Co. (TSMC), UMC, and GlobalFoundries do not design chips but only manufacture devices for other companies.
“It takes about 3-4 years from construction to certification that is needed for telecom, automotive, defence, etc. ISMC is awaiting the Centre’s final approval to begin work, which is 50% of the project cost under the government’s PLI (production-linked incentive) scheme. Karnataka will invest 25%, while Reliance and HCL group, through one of its unlisted companies, will put in 15% cumulatively. The remaining 10% is debt, which is already in place. A 65 nm analog foundry is state-of-the-art and has a life span of about 30 years," the person added.
Semiconductors are the world’s fourth-most-traded product after crude oil, refined oil, and cars.
About 50% of $134 billion of total electronics products demand is imported, according to an April 2020 joint report by the India Electronics and Semiconductor Association (IESA) and Frost and Sullivan.
In December 2021, the government approved a PLI scheme for semiconductor and display board production to attract an investment of ₹76,000 crore in semiconductor production over the next 5-6 years.
This prompted companies to resurrect their mothballed plans.
While ISMC said it would invest ₹22,900 crore in Karnataka to set up a plant, Singapore’s IGSS Ventures said it would invest $3.2 billion in Tamil Nadu to set up a high-tech semiconductor park in the state.
Foxconn and Vedanta said they will set up a semiconductor fab unit, a display fab unit, and a semiconductor assembling and testing unit on a 1,000-acre land in Gujarat’s capital Ahmedabad with an investment of ₹1.54 trillion, the production of which will begin two years from now.
Vedanta had sought 1,000 acres (405 hectare) of land free of cost on a 99-year lease and water and power at concessionary and fixed prices for 20 years in April.
Vedanta Resources Ltd chairman Anil Agarwal said his company is also considering a second chip and display manufacturing facility in India, asserting that India would need at least two such factories to become a hub of chip manufacturing and meet the needs of the country and the world.
In an interview earlier this week, Vinod Dham, the father of the Intel Pentium chip and one of the advisers to the India Semiconductor Mission, said the government has three proposals for semiconductors right now.
A second person familiar with the development said on condition of anonymity that while the government is close to a decision on these proposals, it’s possible that only one or two of the proposals will be approved.
“Analog fabs can be built on older technology nodes, like 65 nm or higher, which are cheaper to make. The higher you go in the node size, the cheaper the machines become. In theory, the complexity of setting up a fab remains the same, but there’s less money needed," said Satya Gupta, chief executive officer of the Electronic Products Innovation Consortium Foundation, an industry body.
“Analog chips are required for all kinds of products, including smartphones and others. They have a variety of use cases," he added.
Chip fabrication units are highly capital-intensive and typically require huge investments.
A state-of-the-art semiconductor fab of standard capacity requires roughly $5 billion (for advanced analog fabs) to $20 billion (for advanced logic and memory fabs) of capital expenditure, including land, building and equipment.
Given that all three consortia are developing 28 nm to 65 nm chips, the Union cabinet had on 21 September approved uniform fiscal support of 50% of project cost for all technology nodes.