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THE UNION Cabinet on Thursday approved three chip related projects worth about Rs 1.26 lakh crore, including what could be India’s first semiconductor fabrication plant, which will be set up by the Tata Group along with a Taiwanese technology partner.
The Tata Group will set up the foundry in partnership with Taiwan-based Powerchip (PSMC) at an estimated cost of Rs 91,000 crore in Gujarat’s Dholera. The plant will have a capacity to produce 300 crore chips every year, which will cater to industries like high performance computing, electric vehicles, defence and consumer electronics, among other things. The construction of the facility will begin in less than 100 days, IT Minister Ashwini Vaishnaw said.
PSMC is a major entity in the chip manufacturing space, and ranks among the top ten semiconductor companies in terms of global revenues. The Indian Express had first reported that the Tata Group was looking to set up a fabrication plant in the country.
Typically, a new fabrication plant — from the date of completion of construction — takes about 4-5 years to produce the first batch of chips. In a briefing, Vaishnaw said that time could be reduced in the case of Tata-PSMC since the land has already been identified and construction will begin soon.
The approvals are a major fillip to India’s semiconductor ambitions. As geopolitical tensions shape the global narrative, the Indian government has identified electronics manufacturing as a key economic growth driver, with chip manufacturing at the heart of these plans.
In tumultuous times, when global value chains are more prone to collapsing, the government wants to ensure a steady supply of the components needed for future technologies — from artificial intelligence to electric vehicles, and defence capabilities to space exploration.
Besides boosting domestic job prospects, the move will also offer India leverage in the chip wars by increasing its say in the geopolitics of technology that has so far been shaped by China and the United States. The government estimates that 1 lakh indirect jobs will be created when the approved projects start getting efficient.
“This fab will have manufacturing capacity of up to 50,000 wafers per month and will include next generation factory automation capabilities deploying data analytics and machine learning to achieve industry-best factory efficiency,” the Tata Group said in a statement.
The chips rolling out of this assembly will primarily be of the 28 nanometre node size, along with 50 nm and 55 nm chips. “This partnership has the potential to redefine the contours of global semiconductor manufacturing… On one end, India has a large and growing domestic demand, and, on the other end, global customers are looking at India for supply chain resilience,” said Frank Hong, Chairman, PSMC.
In December 2021, the government had rolled out a Rs 76,000 crore chip incentive scheme, under which it offered half the amount of a plant’s capital expenditure costs as subsidy. Thus, the proposals cleared on Thursday will receive 50% of their capex costs from the Centre. The states where the plants come up sweeten the deal further by offering additional incentives on land acquisition and other factors.
India’s incentive scheme is much smaller than those being offered by the likes of the US and the European Union — a major reason why the country is having to first focus on more mature nodes like 28 nm and older, and why cutting edge nodes like those used in smartphones and laptops are still out of reach.
The Tata Group will also set up a chip assembly plant in Morigaon, Assam at a cost of Rs 27,000 crore to primarily cater to needs in the automobile market. This plant will have a capacity to manufacture 48 million chips per day, and will primarily cater to export needs. It is a relatively less sophisticated operation with its primary task being to manufacture chips on a contractual basis – where the technology will be provided by Tata’s consumers itself.
A third proposal by CG Power to set up a chip packaging facility in Gujarat’s Sanand was also approved by the Cabinet. The company has partnered with Japan’s Renesas Electronics to set up the plant which will cost Rs 7,600 crore. This facility will focus on niche areas like defence and space exploration — and ISRO could become a potential customer of chips, Vaishnaw said.
Last year, India had approved a $2.75 billion packaging plant being set up by US-based Micron Technology, which is currently under construction in Gujarat. Minister of State for Electronics and IT Rajeev Chandrasekhar said that with the three new approvals, India could start offering end-to-end solutions for the semiconductor space – aided by the fact that it already has a big pool of design engineers and a number of start-ups working on chip design projects.
