Reliance, HCL Enter Semiconductor Chip Manufacturing By Investing In Proposed ISMC Fab In Mysuru,Karnataka: Reports

Two Indian companies are set to pick up a combined stake of anywhere between 26 and 51% in the International Semiconductors Consortium (ISMC), one of the three players to have applied to the Modi government's incentive scheme for setting up a chip fabrication plant.

In May this year, ISMC, led by Next Orbit Ventures and Israel's Tower Semiconductor as a JV partner, inked a Rs 22,900-crore ($3 billion) agreement with the Karnataka government to set up a chip-manufacturing plant on 150 acres of land in Mysuru's Kochanahalli Industrial Area.

ISMC has proposed a fab that can handle 40,000 Wafer Starts Per Month (WSPM) of 300mm (i.e. 12 inches) size wafers at 65nm process nodes when running at full capacity.

"We will now have four investors: Tower Semiconductor of Israel, our technology partner that will take 10-15 per cent stake (it has been bought over by Intel recently); the two Indian companies that will have more than 26 per cent but less than 51 per cent stake; and the balance will be with us. There has been no change in products, which we will manufacture, or in the total capacity of production." Business Standard quoted Next Orbit Director Ajay Jalan as saying.

Leading Indian conglomerate Reliance Industries and software services giant HCL are reported to be planning to invest in the semiconductor consortium through subsidiaries. The total investment estimated from both firms is likely to exceed Rs 4,000 crore ($500-600 million). The terms for both proposed agreements have been signed recently, according to a report in Economic Times.

The development comes amid an indication by Rajeev Chandrasekhar, Union Minister of State for Electronics and IT, that the government is likely to start approving proposals to set up an electronic chip and display manufacturing plant in the country in the next 30-60 days.

In December 2021, the Union Government unveiled a Rs 76,000 crore($10-billion) production-linked incentive (PLI) scheme to lure semiconductor and display manufacturers in a bid to propel the country as a global electronics production and chip manufacturing hub.

In September this year, the Union Cabinet approved changes to the semiconductor PLI scheme, allowing for uniform fiscal support of 50 per cent of project cost for semiconductor fabs across technology nodes and display manufacturing. It also raised the fiscal support for compound semiconductors, packaging and other semiconductor facilities to 50 per cent from 30 per cent earlier.

Earlier, incentives for semiconductor fabs were based on the size of the node — nodes from 45 nanometres (nm) to 65 nm were offered an incentive of 30 per cent of the project cost, those between 28 nm and 45 nm were offered a 40 per cent support, and only nodes from 28 nm and below were offered 50 per cent fiscal support. After the fresh changes, all fab plants will receive fiscal support of 50 per cent, irrespective of node size.

The scheme for chip manufacturing has so far attracted three applicants — a Vedanta-Foxconn joint venture, ISMC and Singapore-based IGSS Ventures. Vedanta and Elest have submitted applications for setting up display manufacturing. SPEL Semiconductor, HCL, Syrma Technology and Valenkani Electronics have registered under the scheme for semiconductor packaging.

The Vedanta-Foxconn joint venture recently signed an agreement with the Gujarat government for setting up its Rs 1,52,000 crore ($20 billion) semiconductor and display panel fabrication facilities in the state.

Singapore-based IGSS Ventures has signed an MoU with the Tamil Nadu government for setting up a chip manufacturing plant. Details on the deal, including investment structure and technology partnership, remain unclear.