India has agreed to allocate up to $15.2 billion (INR 1.26 trillion) to build three new semiconductor factories, including its first semiconductor manufacturing facility — part of the country's larger bid to beat China, Taiwan and other countries in the chip race.
It's worth noting that although AI chips are the talk of the industry right now, none of the three manufacturers are focusing on this area of the market, aiming instead to achieve more traction in general-purpose applications.
The Indian Cabinet on Thursday approved the country's first semiconductor manufacturing facility set up by the Tata Salt-to-Software Group and Taiwan's PowerChip, which will be set up in Gujarat's Dholera district. The facility is expected to have the capacity to produce 50,000 chips per month, and aims to manufacture 3 billion chips per year for a variety of market sectors, including high-power computers, electric vehicles, telecommunications, and power electronics.
Construction work for the semiconductor plant will begin within 100 days, Indian Information Technology Minister Ashwini Vaishnaw told reporters at a press conference in New Delhi.
“A typical semiconductor manufacturing company, the build process takes a three-year time frame. We will compress it significantly.” [sic]The minister said.
Besides the semiconductor plant, the Indian government has agreed to invest $3.2 billion in a semiconductor assembly, testing, labeling and packaging unit to be set up in the northeastern state of Assam by Tata Semiconductor Assembly and Testing Corporation.
This will be the third semiconductor unit in the country and will be able to produce 48 million chips per day. The unit will work to meet the needs of seven sectors: automobiles, electric vehicles, consumer electronics, communications and mobile phones.
The Assam unit will supply chips to a “wide range of companies,” including Indian, American, European and some Japanese companies, Vaishnaw said.
“It will be very good export as well as domestic use,” he noted.
In addition to the manufacturers, the Indian government has approved a $916 million investment from Japan's Renesas Electronics and Thailand's Stars Microelectronics to work with India's CG Power to produce specialized chips in Sanand, Gujarat. It will manufacture chips specifically for niche sectors, such as defence, aerospace, electric vehicles and high-speed trains.
The specialized chip facility will have a daily production capacity of 15 million chips.
This is not the first effort by India to boost the domestic semiconductor sector. For many years, India has had its sights set on becoming a bigger player in the market, but some of its larger efforts have failed to generate much interest.
In 2021, the Indian government announced a $10 billion incentive program to attract the attention of chipmakers and display manufacturers and convince them to set up local facilities in the country by offering incentives of up to 50% of capital expenditures to companies that establish local manufacturing projects. This scheme had to be modified last year after it was poorly received by international companies.
Reasons for the lack of engagement ranged from a complex application process, to a 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 companies.
We heard that the government was trying to convince TSMC – the world's largest chipmaker – to join it, and that it was also pushing companies like Qualcomm, MediaTek and Intel to make more plans for semiconductors in the country. It is worth noting that all of these were absent from today's announcements.
The government today also said that these new units will generate direct employment opportunities for 20,000 high-tech jobs and about 60,000 indirect jobs.
But overall, when you consider the long road ahead to build the nation's chipmaking ecosystems, it's perhaps not surprising that AI chips aren't on the agenda today.
But this is not the whole story. There are also a number of other semiconductor developments underway.
The IT Minister said the Indian government has identified incentives worth $7 billion for the three newly announced semiconductor factories and a $2.75 billion Micron facility, which were announced during Prime Minister Narendra Modi's visit to the US last year. The American company pledged to invest $825 million for the facility.
India is generally looking to attract foreign semiconductor manufacturers by offering billions of dollars in incentives. Companies including Foxconn and AMD have already announced their investment plans to set up local facilities.
The government plans to design its semiconductor program for 20 years, Vaishnaw said. The country also has about 300,000 design engineers, who already design chips for global companies. The new units are expected to generate direct job opportunities for about 20,000 jobs in the field of advanced technology and about 60,000 indirect job opportunities.
“You will see many other semiconductor initiatives by the government, at least, in the near future,” Vaishnau said.
