Govt invites new applications for semiconductor manufacturing unit

The Centre has invited fresh applications seeking incentives to set up semiconductor and display manufacturing fabs. This comes after a joint venture (JV) between Vedanta Resources and Foxconn was reportedly denied the benefits under India’s ambitious semiconductor mission.

Apart from the Vendanta-Foxconn JV, Singapore-based IGSS Ventures and ISMC, the consortium of Abu Dhabi-based Next Orbit Ventures and Israel’s Tower Semiconductor, had applied for the benefits. Both IGSS and ISMC are set to reapply, say top executives of the respectibe consortiums.

However, Vedanta-Foxconn did not respond to their plan of action.

According to a Bloomberg report, the government has decided to deny incentives to Vedanta-Foxconn’s proposed 28-nanometer semiconductor manufacturing facility. This comes after the JV failed to find a technology partner or licence manufacturing-grade technology for the fabrication plant in the nine months after it first announced plans. A query to Vedanta on its plans to reapply for the incentive remained unanswered. 

“ISM (India Semiconductor Mission) @Semicon_India is today announcing that it will start accepting and considering new applications for fabs from new & existing applicants,” said Union minister Rajeev Chandrasekhar on Twitter, responding to the Bloomberg story.

Raj Kumar, founder and group chief executive officer (group CEO) of IGSS Ventures, said: “Yes, we will reapply for the fab project in India.” The consortium is planning to make some changes based on its discussions with the ISM, the nodal agency for the programme.

It will tweak the proposal by bringing in a major global semiconductor company on board as lead investor of the consortium.

ISM had said it needs to get a large anchor investor for the project.

The consortium has three global investors already and they have committed equity.

Ajay Jalan, founder and managing director (MD) of Next Orbit Ventures, also confirmed that ISMC will reapply. It was earlier told by ISM that Next Orbit, a financial investor-run equity fund, should sell its stake to an Indian company.

Though the Vedanta-Foxconn JV may file a new application to meet the government’s criteria, the delay in receiving incentives worth 50 per cent of the development costs of the fabrication unit is considered to be a setback.

“Strategy now is also encouraging mature nodes of >40nm — current and new players may apply afresh in various nodes that they have technology for. It is expected that some of the current applicants will reapply n (sic) fresh investors will also apply,” Chandrasekhar added. 

The $10-billion production-linked incentive (PLI) scheme for semiconductor manufacturing initially focused on encouraging the production of semiconductors with smaller nodes.

The government, in September 2022, revised the semiconductor PLI scheme with a uniform 50 per cent incentive of the project cost for all semiconductor nodes. The earlier one was 30, 40, and 50 per cent incentives for different nodes.

New applications for setting up semiconductor fabrication units in the country can be made from June 1. The application window is open till December 2024. The earlier window for submitting applications for incentives was opened in January 2022 for 45 days. 

The story so far

December 2021: Govt launched India Semiconductor Mission

January 2022: Applications invited within 45 days, 3 applications received

September 2022: Scheme revised with uniform 50% incentive for all semiconductor fabs

May 2023: Vedanta’s application reportedly denied, govt invites new applications