Ismc's India Chip Plan Stalls After Tower: Intel deal in setback to Modi

Tower Semiconductor

01/06/2023 03:00

(Repeats story first published Wednesday with no changes to
text)

        * 
      India's Modi wants to make country a chipmaking hub
    

        * 
      Companies struggling to move ahead with plans-sources
    

        * 
      Intel-Tower deal stalls a consortium's chip plans-sources 
    

        * 
      Vedanta-Foxconn mega JV also proceeding slowly
    

  
    By Munsif Vengattil, Aditya Kalra and Jane Lanhee Lee
       NEW DELHI/OAKLAND, California, May 31 (Reuters) - A
planned $3 billion semiconductor facility in India 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 sources said, dashing India's chip making plans.
    A second mega $19.5 billion plan to build chips locally by a
joint venture between India's Vedanta and Taiwan's Foxconn
 2317.TW  is also proceeding slowly as their talks to rope in
European chipmaker STMicroelectronics  STMPA.PA  as a partner
are deadlocked, a fourth source with direct knowledge said.
    The challenges faced by the companies deal a major setback
to Prime Minister Narendra Modi, who has made chipmaking a top
priority as he wants to "usher in a new era in electronics
manufacturing" by luring global companies.
    India, which expects its semiconductor market to be worth
$63 billion by 2026, last year received three applications to
set up plants under a $10 billion incentive scheme. They were
from the Vedanta-Foxconn JV; a global consortium ISMC which
counts Tower Semiconductor  TSEM.TA  as a tech partner; and from
Singapore-based IGSS Ventures.
    The Vedanta JV plant is to come up in Modi's home state of
Gujarat, while ISMC and IGSS each committed $3 billion for
plants in two separate southern states.
    Three sources with direct knowledge of the strategy said
ISMC's $3 billion chipmaking facility plans are currently on
hold as Tower could not proceed to sign binding agreements as
things remain under review after Intel acquired it for $5.4
billion last year. The deal is pending regulatory approvals.
    Talking about India's semiconductor ambitions, India's
deputy IT minister Rajeev Chandrasekhar told Reuters in a May 19
interview ISMC "could not proceed" due to Intel acquiring Tower,
and IGSS "wanted to re-submit (the application)" for incentives.
The "two of them had to drop out," he said, without elaborating.
    Tower is likely to reevaluate taking part in the venture
based on how its deal talks with Intel pan out, two of the
sources said. 
    ISMC consortium partners Next Orbit Ventures did not respond
to a request for comment and Tower declined comment. Intel also
declined comment.
    Singapore-based IGSS did not respond, and neither did
India's federal IT ministry.
        
  
        SETBACK FOR VEDANTA
  
        Most of the world's chip output is limited to a few
countries like Taiwan, and India is a late entrant. Amid much
fanfare, in September, the Vedanta-Foxconn JV announced its
chipmaking plans in Gujarat. Modi called the $19.5 billion plan
"an important step" in boosting India's chipmaking ambitions.
  
        But things haven't gone smoothly as the JV tries to hunt
for a tech partner. The fourth source said Vedanta-Foxconn had
got on board STMicroelectronics for licensing tecnology, but
India's government had conveyed it wants STMicro to have "more
skin in the game" - like a stake in the partnership.
  
        STMicro is not keen on that and the talks remain in
limbo, the source added. "From STM's perspective, that proposal
doesn't make sense because they want India market to first be
more mature," said the person.
  
        Deputy IT minister Chandrasekhar told Reuters during the
May 19 interview the Vedanta-Foxconn JV was "struggling
currently to tie up with a technology partner."
  
        STMicro declined comment.
    In a statement, Vedanta-Foxconn JV CEO, David Reed, said
they have an agreement with a technology partner to transfer
technology with licenses, but declined to comment further.    
        In a move seen to revive investor interest, India's IT
ministry on Wednesday said the country will start re-inviting
applications for chipmaking incentives. This time the companies
can apply until December next year, as opposed to the initial
phase where there was only a 45 day window.
  
        "It is expected that some of current applicants will
reapply and new fresh investors will also apply," minister
Chandrasekhar said on Twitter.
  

 (Reporting by Aditya Kalra and Munsif Vengattil in New Delhi,
and Jane Lanhee Lee in Oakland, California; Additional Reporting
by Steven Scheer, Editing by Nick Zieminski)
 ((munsif.vengattil@thomsonreuters.com;))