Tower-Intel deal stalls ISMC’s plans for chipmaking in India

A planned $3 billion semiconductor facility in India by chip consortium ISMC that counted Israeli chipmaker Tower as a tech partner has been stalled due to the company’s ongoing takeover by Intel, three sources said, dashing India’s chipmaking plans.

A second mega $19.5 billion plan to build chips locally by a joint venture between India’s Vedanta and Taiwan’s Foxconn is also proceeding slowly as their talks to rope in European chipmaker STMicroelectronics as a partner are deadlocked, a fourth source with direct knowledge said.

The challenges faced by the companies deal a major setback to Prime Minister Narendra Modi, who has made chipmaking a top priority in an effort to “usher in a new era in electronics manufacturing” by luring global companies.

India, which expects its semiconductor market to be worth $63 billion by 2026, last year received three applications to set up plants under a $10 billion incentive scheme. They were from the Vedanta-Foxconn JV; global consortium ISMC, which counts Tower Semiconductor as a tech partner; and Singapore-based IGSS Ventures.

The Vedanta JV plant is planned for Modi’s home state, Gujarat, while ISMC and IGSS each committed $3 billion for plants in two southern states.

Three sources with direct knowledge of the strategy said ISMC’s plans for a $3 billion chipmaking facility are on hold because Tower could not sign binding agreements while its acquisition by Intel for $5.4 billion last year is under review pending regulatory approval.

Talking about India’s semiconductor ambitions, India’s deputy IT minister Rajeev Chandrasekhar told Reuters in a May 19 interview ISMC “could not proceed” due to Intel acquiring Tower, and IGSS “wanted to re-submit (the application)” for incentives. The “two of them had to drop out,” he said, without elaborating.

Tower is likely to reevaluate taking part in the venture based on how its deal talks with Intel pan out, two of the sources said.

ISMC consortium partners Next Orbit Ventures did not respond to a request for comment and Tower declined comment. Intel also declined comment.

Singapore-based IGSS did not respond, and neither did India’s federal IT ministry.

SETBACK FOR VEDANTA

Most of the world’s chip output is limited to a few countries like Taiwan, and India is a late entrant.

Amid much fanfare in September, the Vedanta-Foxconn JV announced its chipmaking plans in Gujarat. Modi called the $19.5 billion plan “an important step” in boosting India’s chipmaking ambitions.

But things haven’t gone smoothly as the JV tries to hunt for a tech partner. The fourth source said Vedanta-Foxconn had got on board STMicroelectronics for licensing technology, but India’s government had said it wants STMicro to have “more skin in the game”, preferably a stake in the partnership.

STMicro is not keen on that, so the talks remain in limbo, the source added. “From STM’s perspective, that proposal doesn’t make sense because they want the India market to first be more mature,” said the person.

Deputy IT minister Chandrasekhar told Reuters during the May 19 interview the Vedanta-Foxconn JV was “struggling currently to tie up with a technology partner.”

STMicro declined comment.

In a statement, Vedanta-Foxconn JV CEO David Reed said they have an agreement with a technology partner to transfer technology with licenses, but declined to comment further.

In a move seen to revive investor interest, India’s IT ministry on Wednesday said the country will start re-inviting applications for chipmaking incentives.

This time the companies can apply until December next year, as opposed to the initial phase, which only had a 45-day window.

“It is expected that some of current applicants will reapply, and new fresh investors will also apply,” Chandrasekhar said on Twitter.