India's Chip Ambitions Hit Another Snag: This Time An Intel Takeover Is To Blame

The planned construction of a $3 billion (₹24,740 crore) semiconductor facility in India by chip consortium ISMC, with partner Israeli chipmaker Tower, has been delayed due to Intel’s ongoing acquisition of Tower — a delay which disrupts India’s ambitions in the chip-making industry.

What Happened? Last year, the government received three applications to establish plants under a $10 billion (₹82,457 crore) incentive scheme, including from the Vedanta-Foxconn joint venture, ISMC in partnership with Tower Semiconductor, and Singapore-based IGSS Ventures.

However, Reuters’ sources state that ISMC’s chip-making facility plans are currently on hold due to the ongoing review following Intel’s acquisition of Tower for $5.4 billion (₹44,528 crore) last year. Meanwhile, India’s Deputy IT Minister, Rajeev Chandrasekhar, notes that ISMC could not proceed due to Intel’s acquisition, and IGSS plans to reapply for incentives.

The development arrives at a time when simultaneously, a joint venture between India’s Vedanta and Taiwan’s Foxconn to build a $19.5 billion (₹1,60,796 crore) local chip manufacturing unit is progressing slowly. Their discussions with European chipmaker STMicroelectronics to join as a partner are at a standstill, says a source close to Reuters.

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These setbacks challenge Prime Minister Narendra Modi’s efforts to prioritize chip manufacturing, aiming to attract global companies and bolster electronics manufacturing in India. The country anticipates its semiconductor market to reach $63 billion (₹5,19,488 crore) by 2026.

Even though the Vedanta-Foxconn chip-making initiative in Gujarat received praise from Modi as an “important step,” finding a tech partner has proven challenging. Vedanta-Foxconn engaged STMicroelectronics for technology licensing, but the Indian government wants STMicro to have a more significant stake in the partnership.

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