India's Reliance explores chipmaking foray, talking with potential partners -sources

Tower Semiconductor

08/09/2023 09:48

By Munsif Vengattil and Aditya Kalra
       NEW DELHI, Sept 8 (Reuters) - Billionaire Mukesh
Ambani's Reliance Industries  RELI.NS  has begun exploring a
foray into semiconductor manufacturing, a move that could
address its supply chain needs and cater to growing chip demand
in India, two people familiar with its strategy said.
    The telecoms-to-energy conglomerate, encouraged by the
Indian government, has held early-stage talks with foreign
chipmakers that have the potential to become technology
partners, said one of the people who has direct knowledge of the
plans. 
    "There is intent, there is no timeline," said the person,
adding that Reliance has "yet to make a call on whether they
want to ultimately invest."
    The names of the foreign chipmakers could not be immediately
learned.
    The sources were not authorised to speak to media and
declined to be identified. Reliance, whose interest in making
semiconductors has not been previously reported, did not respond
to repeated requests for comment. 
    India's IT ministry and Prime Minister Narendra Modi's
office also did not respond to requests for comment.
    Modi has declared he wants his country to become a chipmaker
for the world but those ambitions, first laid out in 2021, have
suffered setbacks. The country does not as yet have any chip
manufacturing plants, although India's Vedanta  VDAN.NS  and
Taiwan's Foxconn  2317.TW  are both looking at building
facilities.
    Reliance sees merit in getting into semiconductors as the
move would help safeguard against chip shortages that could
affect its telecom and electronic devices businesses, the
sources said. In 2021, for example, the conglomerate delayed the
launch of a low-cost smartphone it was developing with Google
 GOOGL.O  citing the chip shortage. 
    Demand for semiconductors in India and globally is also
increasing, they noted. India's government has forecast the
domestic chip market will be worth $80 billion by 2028 compared
with $23 billion currently.
    Reliance, which has a market capitalisation of around $200
billion, would be one the best-positioned companies in India to
delve into semiconductors, said Arun Mampazhy, a former India
executive at U.S.-based chipmaker GlobalFoundries. 
    "They also have deep pockets and know how to work with the
government," he said.
    But chip manufacturing is an industry that has historically
been beset with boom and bust cycles and requires much
expertise.
    "Getting a tech partner – as a joint venture, or via
transfer of technology, is the make or break point" for
Reliance, said Mampazhy.
    Setbacks for India's chip ambitions have come despite the
government's offer of $10 billion in incentives. 
    A $19.5 billion venture between Vedanta and Foxconn
collapsed in July even before it got off the ground as the two
sides struggled to find a tech partner, with Foxconn complaining
that the project had not moved fast enough.
    Foxconn has since decided to invest in India without
Vedanta.
    Plans by ISMC, a venture between Abu Dhabi-based Next Orbit
Ventures and Israel's Tower Semiconductor  TSEM.TA , to invest
$3 billion in India, have moved slowly after Intel  INTC.O 
sought to acquire Tower. Talks between Intel and Tower later
collapsed.
    Reliance has for months been considering an investment of
$300 million that would give it a 30% stake in the venture, a
third source with direct knowledge of discussions said.
    Next Orbit Ventures and Tower did not respond to requests
for comment.

 (Reporting by Munsif Vengattil and Aditya Kalra; Editing by
Edwina Gibbs)
 ((aditya.kalra@thomsonreuters.com; @adityakalra;))