Prime Minister Narendra Modi on Wednesday (March 13) laid the foundation stone of three semiconductor plants, including what is going to be the country’s first commercial fabrication plant. The Prime Minister called the occasion “historic” and added that India was “creating history and taking a big step towards a resilient future”.
The fab is being set up by Tata Electronics in partnership with its Taiwanese partner Powerchip Semiconductor Manufacturing Corporation (PSMC) at an estimated cost of Rs 91,000 crore in Gujarat’s Dholera. IT Minister Ashwini Vaishnaw said that the plant will produce the first batch of chips by December 2026.
The other projects include a chip packaging plant being set up by the Tata’s in Assam and one by the Murugappa Group’s CG Power in partnership with Japanese firm Renesas in Gujarat’s Sanand.
These projects — which represent a cumulative value of Rs 1.26 lakh crore — were cleared by the Union Cabinet last month as part of India’s Rs 76,000 crore capital expenditure incentive scheme for the semiconductor ecosystem. Earlier, a packaging plant of US-based Micron Technology worth $2.75 billion in Sanand was approved by the Cabinet and construction of the facility is currently underway.
The approvals are a major fillip to India’s semiconductor ambitions. As geopolitical tensions shape the global narrative, the Indian government has identified electronics manufacturing as a key economic growth driver, with chip manufacturing at the heart of these plans.
In tumultuous times, when global value chains are more prone to collapsing, the government wants to ensure a steady supply of the components needed for future technologies — from artificial intelligence to electric vehicles, and defence capabilities to space exploration.
“These plants will help in making India a chip manufacturing hub,” PM Modi said addressing the gathering at Dholera virtually. “The 21st century is a technology driven century and without chips it can’t be imagined,” he said, adding that “made in India, designed in India chips will offer the country momentum towards self reliance”.
“Only a few countries are manufacturing chips. Covid taught us that the world needs a reliable supply chain – India is committed to playing a big role in that,” the PM said.
IT Minister Vaishnaw said the plants mark a major milestone in India’s electronics manufacturing ambitions. “Efforts to get a fab in India have been going on since 1962, but we have finally achieved success today,” he said. He also highlighted that the chips will be used in all kinds of downstream industries and will cater to both domestic needs and export demands.
Minister of State (MoS) for Electronics and IT Rajeev Chandrasekhar said that the fab and packaging plant will spur an ancillary industry with suppliers in the chip value chain also looking to set up shop in India. “When you create these big investments, what you also do is bring ecosystem players such as water treatment, gases and very precision industries,” he said.
N Chandrasekaran, Chairman, Tata Sons, said that the fabrication plant will have a “lasting impact” on India, with chips made at the facility being used for both the domestic market and exports. He added that the plant’s Taiwan-based technology partner has given the domestic manufacturer access to an “extensive range of technologies”.
Outlining why it was critical that India builds self sufficiency in chips, Chandrasekaran called it a crucial step towards strengthening the country’s national security given the increasing number of cyber warfare incidents. He added that the chip shortage during the Covid-19 pandemic exposed India’s dependence on global supply chains, and having a facility in the country will also galvanise the indigenous product ecosystem.
In December 2021, the government had rolled out a Rs 76,000 crore chip incentive scheme, under which it offered half the amount of a plant’s capital expenditure costs as subsidy. These plants will all receive 50 per cent of their capex costs from the Centre. The states where the plants come up sweeten the deal further by offering additional incentives on land acquisition and other factors.
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Incidentally, India’s incentive scheme is much smaller than those being offered by the likes of the US and the European Union — a major reason why the country is having to first focus on more mature nodes like 28 nm and older, and why cutting edge nodes like those used in smartphones and laptops are still out of reach for now.
