Next Orbit Ventures Fund forms consortium to manufacture analog chips

Next Orbit Ventures Fund has stitched together a consortium to invest $3 billion to manufacture analog chips in Dholera in Gujarat

Next Orbit Ventures Fund, a multi-asset fund management company, has stitched together a consortium, which includes global wafer foundries, Indian corporate houses, and some Navaratna public sector undertakings, to invest $3 billion to manufacture analog chips in Dholera in Gujarat.

In the fullness of time, the Mumbai-based fund will invest $15 billion. This will include two other ventures, which will be separate companies: one to manufacture digital chips in a technology tie-up with the fourth largest foundry in the world in Taiwan and the other to manufacture memory chips with which the fund has an understanding with the second largest IDM fabLESS company in the world.

The company set up for the purpose, ISMG Analog Fab, is one of three players who have applied to set up a semiconductor fabrication plant under the government’s incentive scheme to build a semiconductor ecosystem for which the latter has earmarked over Rs 76,000 crore. The other two companies are Vedanta with Foxconn Technology as an equity partner and Singapore-based IGSS Ventures. 

Initially, according to government sources, ISMC Analog Fab has gone for a technology partnership with Israel-based Tower Semiconductor, which a few weeks ago was bought by Intel.

Under the agreement with Tower Semiconductor, the fab plant will have rights to use 50 per cent of the capacity in India for fulfilling its own contracts.  The plant will initially make 65 nanometre chips, going down to 45 nanometres, with a capacity to make 40,000 Wafer Start Per Month (WSPM)

Ajay Jalan, founder of Next Orbit Ventures Fund, speaking about the company’s plans, said: “We will have around three to four equity partners in the consortium which include technology partners, Indian corporates and Navratna PSUs, each having over 25 per cent stake. We will also have to tie up and support Assembly, Testing, Marking, and Packaging (ATMP) and Printed Circuit Board (PCB) players so that a semiconductor ecosystem is built,” he said.

Jalan said the technology provider will be given different options or combinations which will include offering equity, royalty for technology or an outright acquisition of technology.  However, he declined to give the names of the consortium partners because of non-disclosure agreements.

Jalan said that while a plant with a similar configuration elsewhere would need an investment of around $5 billion, it is cheaper to build it in India. That said, it will take about four to five years for such a plant to take off commercially as the ecosystem and infrastructure will have to be built from scratch.

The company will start production in stages, beginning with 10,000 WSPM and going up to 40,000 WSPM which accounts for around 20 per cent of the country’s market.

To save time, the company is planning to replicate a similar kind of plant which is already available from Tower Semiconductor.  

Meanwhile Bangalore-based gold and jewellery retailer Rajesh Exports, according to government sources, is the second company to have applied under the semiconductor incentive scheme to set up a display fabrication plant.

The new company floated for the purpose, ELEST, plans to set up a display fabrication plant but, unlike Vedanta (the other applicant which has plans to set up an LCD display facility initially), ELEST is taking a step ahead in technology. It is going for a sixth generation display fab for the manufacture of state-of-the-art AMOLED display panels which are used in top of the line smartphones - a technology which is limited to a few players.

On Saturday, the government announced the players who had applied under the incentive scheme in the first round. The five proposals cumulatively have added up to a commitment to put up $20.5 billion as investment. The government is offering to fund between 30-50 per cent of the capital cost of the project which is in line with global offerings.