Tower's plan for first Indian chip foundry likely to get nod today

The Cabinet is likely to approve on Thursday incentives for Israeli semiconductor company Tower’s proposal for a chip fabrication unit, said people with knowledge of the matter. This will pave the way for India’s first pure-play chip foundry, they said.

The project is pegged at $9-10 billion, of which 50% will be subsidised by the Centre under the Indian Semiconductor Mission (ISM). States provide an additional 15-25% subsidy.

The outsourced assembly and testing (OSAT) unit proposals of the HCL Group-Foxconn Group joint venture and the Tata group are also likely to get Cabinet approval, said the people cited above.


“There are around four to five proposals that will be discussed. Approval to a few is expected to be given,” said one of the persons cited above.

ET reported earlier that HCL had tied up with Taiwan’s Foxconn to set up an OSAT unit. Tata is likely to set up an OSAT or an assembly, testing, marking and packaging (ATMP) unit at Jagiroad in Assam. Tata has also announced its intent to set up a chip fabrication unit at Dholera in Gujarat.

The proposed investment in the HCL-Foxconn JV is nearly $100 million, of which Foxconn is likely to invest up to $30 million.

ET reported in October that Tower had resubmitted a proposal to set up a foundry for legacy nodes of 65 and 40-nanometre chips.

A few other proposals for setting up OSAT and ATMP units have been submitted, including one by the Murugappa Group’s CG Power. It is unclear if the proposal by CG Power will be approved on Thursday.

OSAT and ATMP units are important parts of the semiconductor supply chain. Most foundries, after manufacturing the chip, outsource the ATMP part to companies that have the expertise. OSAT and ATMP units are relatively easier to set up and cost less than foundry units.

Foundries are expensive to build and have long gestation periods. Over the years, a few companies such as Taiwan Semiconductor Manufacturing Co, Intel, Samsung, Global Foundries, United Microelectronics Corp and Tower have cornered a large share of the chip manufacturing market.

According to experts, investment in a foundry can range from $5 billion to $10 billion.

Since the India Semiconductor Mission was launched in December 2021, India has approved an OSAT proposal submitted by US-headquartered Micron, which moots an investment of $825 million to set up its unit at Sanand in Gujarat. Overall, the total investment in the OSAT unit will be $2.75 billion, which will come from a mix of central and state subsidies.

The government in December 2021 announced an incentive outlay of Rs 76,000 crore to set up a semiconductor manufacturing and fabrication ecosystem. The scheme initially proposed to give incentives depending on the technology. It was revised in October last year to give a flat 50% incentive to all players, irrespective of the technology and the nature of the facility.

A Tower-ISMC joint venture was among the first three companies vying for incentives under the mission, while another joint venture between Vedanta and Foxconn had also applied to set up semiconductor units in India. Singapore-based IGSS Ventures was the third company that had shown interest.

None of these initial plans fructified, following which Tower and Foxconn have chosen different partners to go ahead with their respective plans.