Indian govt likely to reopen semiconductor application worth $10 billion to attract global chip companies

A day after India's IT Minister Ashwini Vaishnaw interacted with the leadership team of Semiconductor Equipment and Materials International (SEMI), which is the trade organisation for the semiconductor and general electronics industry, to discuss about India's Semiconductor Mission, news has surfaced about the ministry planning to reopen the application process for the $10 billion in incentives and assistance to setup chip manufacturing in India. 

Minister Vaishnaw is on a three-day visit to USA, where he met Google CEO Sundar Pichai and is expected to meet leaders of chip companies including Intel, Micron, Global Foundries, among others to woo them to invest in India.

The government of India had approved $10 billion (Rs 76,000 Crore) incentive to build semiconductor ecosystem in India back in December 2021. The first round of applications was closed in February 2022, under which the government had received three applications for chip manufacturing and two for display manufacturing.

First application for chip manufacturing was Vedanta in JV with Foxconn, second being the Singapore-headquartered IGSS Ventures pte and then third in silicon fab being ISMC. ISMC is a proposal by Abu Dhabi-based NextOrbit Ventures in partnership with Tower Semiconductor (an Israel based leading foundry of high-value analog semiconductor solutions which Intel will be acquiring for $5.4 billion). The applications have been received for setting up 28 nm to 65 nm semiconductor fabs with capacity of approx.

While the India Semiconductor Mission still hasn’t announced whether any of the applications will be approved, news is, it is now reopening the application process after 15 months.

Arun Mamphazy, an independent semiconductor analyst told Business Today, “We don't know yet if any applications in the first round is being approved or not. Quite likely, IGSS is definitely not going to be approved, ISMC is also very less likely. Vedanta-Foxconn, may be, if it gets approved, then it depends on what cost they have approved at. If it is $5 billion for 40 nanometer, it makes sense. Anything else will be surprising. If they approve $8 billion, it will be surprising. So, we will have to wait.”

There is also a possibility that none of the applications in the first round has been approved. The reason could be that none of the applications has been completely satisfactory from the cost perspective.

Mamphazy also highlighted that all of applicants, probably, were allowed to tweak their applications after the first round of deadline of February 15, 2022. “This could legally be a problem because the scheme is closed for new applicants and you are allowing existing applicants to make changes. So, to be on the safe size, ISM might just reopen and say apply fresh.”

Sources closer to the ministry told Business Today that the government has learnt from the past and does not intend to cap it at 45 days to submit application. It intends to keep it open-ended, allowing interesting companies to apply as and when they are ready.