Israel's Tower will have a 10-15% stake in venture: Next Orbit's Ajay Jalan

'Tower is fully committed to support the venture from the detailed project report stage and tech transfer to project execution', said Jalan

International semiconductor consortium ISMC, led by Next Orbit Ventures with Israel’s Tower Semiconductor as JV partner, signed a Rs 22,900-crore ($3 billion) memorandum of understanding on Sunday to set up a chip-making plant on 150 acres of land in Mysuru’s Kochanahalli Industrial Area. The proposed 65-nanometre (nm) analog semiconductor fabrication (fab) unit is expected to employ 1,500 people directly over seven years. It is one of the three projects to have applied for incentives under India’s Semiconductor Mission. ISMC Director and Next Orbit Founder and Managing Partner AJAY JALAN in conversation with Surajeet Das Gupta elaborates on the funding and technology (tech) road map for the three-phase project. Edited excerpts:    

What is the total funding required for you to manufacture analog fabs? You have floated a fund based in Abu Dhabi for high-tech investment. Are you talking to sovereign funds in West Asia like Mubadala that have been big investors in the semiconductor business through global foundries?

The project gets off the ground after full financial closure of $3 billion. The same will be drawn over three to four years as indicated by the project execution requirements. We have complete visibility and commitment on the finance, equity investor mix, fiscal support from the central and state governments, and debt from financial institutions and banks. Our entire fund-raising plan is visible and under control. We are talking to sovereign funds in West Asia like Mubadala. 

Is Tower putting in equity and assuring you buyback?

Tower is fully committed to support the venture from the detailed project report stage and tech transfer to project execution. It will also use our surplus capacity for its clients. In addition, it has an equity stake in the project at a fixed amount between 10 per cent and 15 per cent, depending on total project equity. The perpetual licensing fee will be paid in the form of cash, equity, and royalties over the project period.

Your key partner Tower has been acquired by Intel. Will the project get the same support and commitment from the new owner?

Due to the legality of the Intel-Tower acquisition, I cannot comment. However, India will be the fastest-growing semiconductor consumption market in the world, with annual domestic demand expected in excess of $110 billion by the end of the decade, as stated recently by Minister of State for Electronics and Information Technology Rajeev Chandrasekhar. He said India would provide a massive captive consumption market for semiconductor companies, and against the current $24 billion, local demand would be to the tune of $80 billion by 2025, and over $110 billion by 2030. Global chipmakers would evince serious interest in bringing large-scale investments in this category.

You were earlier planning to set up a manufacturing facility in Gujarat. Why have you decided to change it to Mysuru?

Water, power, access to talent, quality of life for talented engineers, customised incentives, a decisive and proactive chief minister and his team were the primary drivers behind the move.

What is the size of the analog chip market? What percentage will you cater to in India?

The initial capacity will cater to roughly around 15-20 per cent of the total India market requirements to begin with. Once firmly entrenched, we will go for capacity expansion.

What are the other two phases of the project you will implement? What is the investment bill for that? Do you have tech partners sewed up there?

We are planning to set up a digital chip plant at an investment of $10 billion (to manufacture chips of 22 nm and below) and a $5-billion memory fab plant. These are the other two phases of our plan. We have tech partners of choice, as well as letters of intent for the other two phases. We will decide, based on India market requirements, in consultation with our existing tech partner for an analog fab.