Modi's chip making plan flounders as firms struggle to find tech partners (updated)

Tower Semiconductor

01/06/2023 06:29

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      India's Modi wants to make country a chipmaking hub
    

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      Companies struggling to move ahead with plans-sources
    

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

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      Vedanta-Foxconn mega JV also proceeding slowly
    

  
 (Recasts headline, first paragraph of Wednesday story, changes
dateline)
    By Munsif Vengattil, Aditya Kalra and Jane Lanhee Lee
       NEW DELHI/OAKLAND, California, June 1 (Reuters) - Big
companies including a Foxconn joint venture that bid for India's
$10 billion semiconductor incentives are struggling due to the
lack of a technology partner, a major setback for Prime Minister
Narendra Modi's chipmaking ambitions.
    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 people with direct knowledge of the strategy
said.
    A second mega $19.5 billion plan to build chips locally by a
joint venture between India's Vedanta and Taiwan's Foxconn 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.
    Modi has made chipmaking a top priority for India's economic
strategy 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 the 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.
    The three sources 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. Tower and Intel declined to comment.
Singapore-based IGSS and India's federal IT ministry did not
respond to requests for comment.
    
    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 have not 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 technology, 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 to 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; Additional Reporting by Steven
Scheer; Editing by Nick Zieminski)
 ((munsif.vengattil@thomsonreuters.com;))