The Indian government is currently evaluating $21 billion in semiconductor proposals and considering how to allocate taxpayer support among foreign chipmakers, local champions, or a combination of both. The proposals include a $9 billion plant from Israel’s Tower Semiconductor Ltd. and an $8 billion chip fabrication unit from India’s Tata Group, both proposed for Prime Minister Narendra Modi’s home state of Gujarat.
Semiconductors have become a crucial geopolitical battleground, with countries like the US, Japan, and China heavily investing in domestic capabilities. The Indian government aims to support the development of domestic production to reduce dependence on costly imports and to strengthen the smartphone assembly industry.
Under India’s chipmaking incentive plan, the government would fund half of the approved projects, with an initial budget of $10 billion. Previous attempts by local and international partnerships have faced challenges, so the government is making efforts to attract international chipmakers. This includes financial incentives that have facilitated Apple Inc. and Micron Technology Inc. in setting up manufacturing facilities in India.
Tower Semiconductor Ltd.'s proposed plant in India would provide the company with access to an emerging market and help it recover from a failed acquisition bid by Intel Corp. If approved, this would be the first fabrication unit in India operated by a major semiconductor company. On the other hand, the Tata Group is expected to partner with Taiwan’s Powerchip Semiconductor Manufacturing Corp. for its project. Both Tower and Tata's facilities aim to produce mature chips, widely used in consumer electronics, automobiles, defense systems, and aircraft.
In addition to the semiconductor proposals, the Tata Group also plans to build a $3 billion chip-packaging plant in eastern India. These initiatives are part of Tata's larger push to invest in high-tech businesses.
The Modi administration is set to evaluate all chip proposals and any projects approved for state subsidy will be required to make detailed disclosures about their technology partners, production agreements, financing plans, semiconductor types, and target customers. The Indian government’s aim is to leverage its geopolitical standing and present itself as a stable democracy and reliable tech center to attract international partners.
Ultimately, the government is poised to play a crucial role in deciding how to support the growth of semiconductor manufacturing in India, balancing the interests of both domestic and international players while aiming to achieve self-sufficiency in this critical sector.
