The Indian government has to now assess $21 billion worth of semiconductor proposals, and distribute taxpayer support between local and foreign chipmakers or a combination of both, after years of watching from the sidelines of the chips race.

 

Tower Semiconductor Ltd. from Israel is considering building a plant worth $9 billion, while Tata Group from India has suggested an $8 billion chip fabrication unit. Both projects will be located in the home state of Prime Minister Narendra Modi, Gujarat. The sources have chosen to remain anonymous as the matter is not yet public.

 

Semiconductors have emerged as a critical geopolitical arena, with countries such as the US, Japan and China making significant investments to develop their domestic capabilities. In line with Modi's vision to transform India into a leading global manufacturing hub, the country aims to attract international chipmakers. This move will help India catch up in the semiconductor sector, reduce the cost of expensive imports, and foster the growth of the burgeoning smartphone assembly industry.

 

India's chipmaking incentive plan involves the government paying for half the cost of approved projects, and an initial budget of $10 billion has already been set. However, India has yet to successfully establish itself in this field, as the highly-publicized partnership between Vedanta Resources Ltd. and Taiwan's Foxconn Technology Group fell apart due to the inability to find a suitable partner for chip design technology. The only government-controlled project in this field is located in the northern part of the country, and produces small quantities of mature-technology chips.

 

The Indian government's financial incentives have been instrumental in helping Apple Inc. manufacture and export billions of dollars worth of iPhones from the country. Additionally, Google, a subsidiary of Alphabet Inc., is planning to start assembling phones in India this year.