India has approved up to $15.2 billion (1.26 trillion Indian rupees) to build three new semiconductor factories, including its first semiconductor manufacturing unit – part of the country’s major push to counter China, Taiwan and other countries in the chip race.
Importantly, although AI chips are very much the talk of the industry at the moment, none of the three factories are focusing on this area of the market, aiming instead for greater traction in general-purpose applications.
India’s cabinet on Thursday approved the country’s first semiconductor manufacturing facility set up by software conglomerate Tata Group and Taiwan’s Power Chip to be set up in Gujarat’s Dholera district. The manufacturing unit expects to have the capacity to produce 50,000 wafers per month and aims to manufacture 3 billion chips per year for various market segments, including high-powered computers, electric vehicles, telecommunications and electronics.
Indian IT Minister Ashwini Vaishnaw told reporters at a media briefing in New Delhi that construction work on the semiconductor plant would begin within 100 days.
“A typical semiconductor factory, the build is a three to four year time frame. We’re going to compress it significantly [sic]said the minister.
Alongside the semiconductor plant, the Indian government has approved a $3.2 billion investment in a semiconductor assembly, testing, marking and packaging facility planned to be set up in the northeastern state of Assam by Tata Semiconductor Assembly and Test.
This will be the country’s third semiconductor plant and will be able to produce 48 million chips per day. The unit will serve seven sectors: automotive, electric vehicles, consumer electronics, telecommunications and mobile phones.
The Assam unit will supply chips to a “wide range of companies”, including Indian, US, European and some Japanese companies, Vaishnaw said.
“It will be a very good export as well as domestic use,” he noted.
In addition to the two factories, the Indian government approved the investment of $916 million by Japan’s Renesas Electronics and Thailand’s Stars Microelectronics to partner with India’s CG Power to produce specialized chips in Sanand, Gujarat. It will make 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 attempts to boost its domestic semiconductor sector. For years, India has aimed to become a bigger player in the market, but some of its biggest efforts have failed to generate much interest.
In 2021, the Indian Govt was announced a $10 billion incentive program to win the attention of chipmakers and display manufacturers and convince them to set up local facilities in the country, offering incentives of up to 50% of capital expenditures to companies that set up domestic manufacturing projects. This system had to be modified last year after poor adoption by international companies.
Reasons for the lack of commitment ranged from a complicated application process to a lack of a pre-existing ecosystem: the world’s biggest players were skeptical that India had the right mix of skilled labor and other conditions to set up and operate these businesses.
We had heard that the government was trying to get TSMC — the world’s largest chipmaker — to join, and that it was pushing companies like Qualcomm, MediaTek and Intel to also draw up 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 will create direct employment of 20,000 high-tech jobs and around 60,000 indirect jobs.
But overall, when you consider the long road ahead for chip manufacturing ecosystems in the country, it’s perhaps no surprise that AI chips aren’t really on the agenda today.
That’s not the full story, though. There are also a number of other semiconductor developments in the pipeline.
The IT minister said the Indian government had outlined $7 billion in incentives for the three recently announced semiconductor units and the $2.75 billion Micron facility, announced during Prime Minister Narendra Modi’s visit to the US last year. The American company had committed an investment of 825 million dollars for the facility.
India in general has been trying 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 set up local facilities.
Vaishnaw said the government plans to plan the semiconductor program for 20 years. The country also has about 300,000 design engineers, who already design chips for global companies.
“You will see various other semiconductor initiatives from the government, at least, in the near future,” Vaishnaw said.
