India approved allocating up to $15.2 billion (1.26 trillion Indian rupees) to build three new semiconductor plants, including its first semiconductor factory, part of the country’s big bid to compete with China, Taiwan and other countries in the chip race.
Significantly, although AI chips are the talk of the industry right now, none of the three plants are focused on that area of the market, instead aiming for greater traction in general-purpose applications.
The Indian cabinet on Thursday approved the country’s first semiconductor factory set up by salt-to-software conglomerate Tata Group and Taiwan’s Power Chip, to be set up in the Dholera region of Gujarat. The fabulous facility is expected to have the capacity to produce 50,000 wafers per month and aims to manufacture 3 billion chips per year for a variety of market segments, including high-power computers, electric vehicles, telecommunications and power electronics.
Indian IT Minister Ashwini Vaishnaw told reporters at a news conference in New Delhi that construction work on the semiconductor factory will begin within 100 days.
“The construction of a typical semiconductor factory requires a period of three to four years. We will be compressing it significantly. [sic]“said the minister.
In addition to the semiconductor factory, the Indian government has approved the investment of $3.2 billion in a semiconductor assembly, testing, marking and packaging unit that Tata Semiconductor Assembly and Test plans to set up in the northeastern state of Assam.
This will be the third semiconductor unit in the country and will be able to produce 48 million chips per day. The unit will serve seven segments: automotive, electric vehicles, consumer electronics, telecommunications and mobile phones.
The Assam unit will supply chips to a “broad spectrum of companies”, including Indian, American, European and some Japanese companies, Vaishnaw said.
“It will be a very good export as well as for internal use,” he said.
In addition to the two plants, the Indian government has approved the investment of $916 million by Japan’s Renesas Electronics and Thailand’s Stars Microelectronics to work with Indian company CG Power to produce specialized chips in Gujarat’s Sanand. It will manufacture chips precisely for specialized sectors, such as defense, space, electric vehicles and high-speed trains.
The specialized chip facility will have a daily production capacity of 15 million chips.
These are not India’s first efforts to boost its domestic semiconductor sector. For years, India aimed to become a bigger player in the market, but some of its biggest efforts failed to generate much interest.
In 2021, the Indian government announced a $10 billion incentive program to attract the attention of chip and display manufacturers and convince them to set up local facilities in the country, offering incentives of up to 50% of manufacturing costs. capital to companies that establish national manufacturing projects. That scheme had to be modified last year after poor acceptance by international companies.
The reasons for the lack of commitment ranged from having a complicated application process to the lack of a pre-existing ecosystem: the world’s largest players were skeptical that India had the right mix of skilled labor and other conditions to build and operate these businesses.
We had heard that the government was trying to convince TSMC, the world’s largest chipmaker, to come on board, and that it is pressuring companies like Qualcomm, MediaTek and Intel to also come up with more plans for semiconductors in the country. Notably, all of these were absent from today’s announcements.
The government also said today that these new units would generate direct employment of 20,000 advanced technology jobs and around 60,000 indirect jobs.
But overall, when you consider the long road ahead to build chip manufacturing ecosystems in the country, it is perhaps not a surprise that AI chips are not really on the agenda today.
However, that is not the full story. Other semiconductor developments are also in the works.
The IT minister said the Indian government had outlined $7 billion in incentives for the three recently announced semiconductor plants and the $825 million Micron facility, announced during Prime Minister Narendra Modi’s visit to the United States on last year.
More broadly, India is seeking to attract foreign semiconductor manufacturers by offering billions of dollars in incentives. Companies such as Foxconn and AMD have already announced their investment plans to establish local facilities.
Vaishnaw said the government plans to design its semiconductor program over 20 years. The country also has around 300,000 design engineers who are already designing chips for global companies. In addition, the new units are expected to generate direct employment of 20 thousand advanced technology jobs and around 60 thousand indirect jobs.
“We will see other semiconductor initiatives from the government, at least, in the near future,” Vaishnaw said.
