India set to announce its first semiconductor fab

India is set to announce its first semiconductor fabrication facility in the next few weeks, as the country moves to become more self-reliant for its chip supply in the wake of pandemic supply chain disruptions and the ongoing US semiconductor restrictions to China.

The country is well-positioned to foster a vibrant chip industry in the next three to four years on the "back of enabling policies" and the government's drive to boost its "manufacturing ecosystem," Indian IT Minister Ashwini Vaishnav said on Tuesday, according to a PTI (Press Trust of India) report.

Three entities - including a Vedanta-Foxconn joint venture, the International Semiconductor Consortium (ISMC), and Singapore's IGSS Ventures - are vying to secure financial support under India's $10 billion incentive scheme, and areĀ  waiting for official approval to set up semiconductor fabrication units. Vaishnav said decisions on approval and financing will be announced in the next few weeks, according to PTI.

India moves to reduce dependence on chip imports

By promoting local manufacturing, India can reduce its dependence on imports and increase its ability to withstand global supply chain disruptions. This can also generate employment opportunities and promote economic growth.

The pandemic caused chip supply disruptions, which led to a global semiconductor shortage and a hike in prices. Meanwhile, the US has implemented restrictions on exports of chips and chip-making equipment to China - including semiconductors used for servers, AI and high-performance workloads - and has pressured its allies to enact similar controls. The restrictions are curbing China's ability to manufacture and export semiconductors and a range of products that incorporate them.

If the Vedanta-Foxconn joint venture gets the approval, it will set up its semiconductor and display manufacturing facility at the Dholera Special Investment Region near Ahmedabad, Gujrat.

ISMC, a consortium including Abu Dhabi-based Next Orbit Ventures and Israel's Tower Semiconductor (now owned by Intel), has signed a memo of understanding with the Karnataka government for a $3 billion fabrication plant in Karnataka, where it has sought 150 acres in the Kochanahalli industrial area.

IGSS has chosen Tamil Nadu as its factory location.

While the three consortia are competing for the incentives, only one company is likely to receive funding, and that will probably be Vedanta-Foxconn, according to a report by India-based business news site Mint. Meanwhile, IGSS is almost out of the competition, according to the report, citing a top official familiar with the matter.

Incentives extended to global chip makers

India is offering an array of financial and other incentives including infrastructure development and streamlined regulations, to attract global companies to establish semiconductor fabs in the country amid competition from China, Taiwan, and South Korea.

India will extend financial support equal to 50% of a fab construction project cost "to applicants who are found eligible and have the technology as well as capacity to execute such highly capital and resource intensive projects," said a Ministry of Electronics and Information Technology statement in September.

"Government of India will work closely with the State Governments to establish High-Tech Clusters with requisite infrastructure in terms of land, semiconductor grade water, high quality power, logistics and research ecosystem to approve applications for setting up at least two greenfield Semiconductor Fabs and two Display Fabs in the country," the statement added.

In a move to drive long-term strategy for developing a sustainable semiconductor and display ecosystem, a specialized and independent agency, the India Semiconductor Mission, was set up last year. Its charter is to work with other government bodies to ensure efficient implementation of the country's semiconductor initiatives.