A fresh twist: Next Orbit, ISMC give Tower Semiconductor legal ultimatum

In a fresh twist, lawyers representing chip consortium ISMC and Next Orbit Ventures Fund have communicated to Tower Semiconductor and its legal team that the decision of “termination of agreement” by the Israeli technology major to set up a fab plant in India is “unlawful”, and that their clients will pursue “all available legal remedies” in case Tower does not abide by its “obligations and duties”.

The communication was sent on January 24, but late last week there were reports that Tower had applied to the Indian government to set up a fab plant that will make chips of 40-65 nanometres, with an investment of $8 billion.

Ajay Jalan, founder of Next Orbit, confirmed the legal communication to Tower and added that the agreement can be cancelled only if it has been rejected by the government. Tower has not responded to the detailed queries in the communication set by its former partners.

ISMC was set up as a consortium led by Jalan, and it had Tower as its technology partner. It was one of the three companies that first went with a proposal in February 2022 to set up a fab plant under the government’s new semiconductor scheme.

Under the scheme, the government has promised to offer 50 per cent (earlier it was 30 and 50 per cent depending on chip size) of the upfront cost of the project as subsidy, while state governments are willing to put in another 20-25 per cent.

The lawyers representing ISMC and Next Orbit have made it clear that in case Tower goes ahead with a similar project with any other partner in the country, their clients will not hesitate to initiate legal proceedings against Tower India. That includes filing injunctions against any new project proposal that Tower might file and also seeking damages. They have requested Tower to provide all necessary assistance in the submission of a revised application for the project.  

The consortium’s application to set up a fab plant has gone through numerous phases. Soon after Tower was brought in as a technology partner, the latter announced that it was being bought by Intel for $5.4 billion. But the deal ran into trouble on account of regulatory issues, and, finally, it fell through in August 2023.

Meanwhile, the government wanted ISMC to get the project with Tower ratified by Intel, before it could proceed, but this was not forthcoming.

After the Intel deal fell through, top executives of Tower, led by its CEO Russel Ellwanger, came to India in October last year and met Minister of State for Electronics and IT Rajeev Chandrasekhar. However, government officials privately admitted that their discussions with some prospective Indian partners met with muted response.

Tower is one of the nine bidders for the overhaul of the Semiconductor Laboratory in Mohali.