Modi’s plan to make chips falters as firms struggle to find technology partners

NEW DELHI/OAKLAND, Calif., June 1 (Reuters) – Major companies, including a Foxconn joint venture bidding for India’s $10 billion semiconductor incentives, are struggling for the lack of a technology partner, a major setback for Prime Minister Narendra Modi’s ambitions to chip production.

A planned $3 billion semiconductor plant in India by chip consortium ISMC that counted Israeli chipmaker Tower as a technical partner has been stalled because of the company’s ongoing takeover of Intel, three people with direct knowledge of the strategy said.

A second $19.5 billion megaplan to build chips locally by a joint venture between India’s Vedanta and Taiwan’s Foxconn is also moving slowly as its negotiations with European chipmaker STMicroelectronics ( STMPA.PA ) as a partner are deadlocked, a fourth source with direct knowledge. so.

Modi has made chipmaking a top priority for India’s economic strategy as he wants to “usure 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 that counts Tower Semiconductor ( TSEM.TA ) as a technical partner; and from Singapore-based IGSS Ventures.

The Vedanta JV facility is to come up in Modi’s home state of Gujarat, while ISMC and IGSS each committed $3 billion for facilities in two separate southern states.

The three sources said ISMC’s $3 billion chip-making plans are currently on hold as Tower could not proceed with signing binding agreements as things remain under review after Intel bought it for $5.4 billion last year. The agreement is awaiting regulatory approvals.

Speaking of India’s semiconductor ambitions, India’s Deputy IT Minister Rajeev Chandrasekhar told Reuters in an interview on May 19 that ISMC “could not proceed” due to Intel’s acquisition of Tower, and IGSS “wanted to submit (the application) again” for incentives. “Those two had to drop out,” he said without elaborating.

Tower is likely to reconsider its participation in the venture based on how 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.

BACK FOR VEDATA

Most of the world’s chip production 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 plans to make chips in Gujarat. Modi called the $19.5 billion plan “an important step” to boost India’s chip manufacturing ambitions.

But things have not gone smoothly as the JV tries to hunt for a technology partner. The fourth source said Vedanta-Foxconn had brought in STMicroelectronics for technology licensing, but India’s government had conveyed that it wants STMicro to have “more skin in the game” – as 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 the India market to be more mature first,” the person said.

Deputy IT Minister Chandrasekhar told Reuters during the May 19 interview that the Vedanta-Foxconn JV is “currently struggling to connect with a technology partner.”

STMicro declined to comment.

In a statement, Vedanta-Foxconn JV CEO David Reed said it has 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 said on Wednesday that the country will start inviting applications for chip-making incentives again. This time the companies can apply until December next year, in contrast to the initial phase where there was only a 45-day window.

“It is expected that some of the 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

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