Anil Agarwal’s dream of setting up a $19 billion chip-making plant in India is floundering as his creation now struggles to secure a technology partner. The Dream faces challenges to obtain financial incentives from the government, as published in The Economic Times.
Post seven months after a partnership was announced between Taiwan’s Hon Hai Precision Industry Co and Anil’s Vedanta Resources Ltd., the deed is yet to tie up with a licensed manufacturing-grade technology or a fabrication unit operator. This was reported by common people who were familiar with the partnership. One comment also said that the venture is yet to receive significant financial incentives with the government’s approval. It is precisely hard to set up new semiconductor plants, as the venture claims its difficulties to the media. Massive complexes cost almost billions to construct and require a team of very specialized experts to run. Mining and metals group Vedanta and iPhone assembler Hon Hai without any background chip-making experience are still among the first to try to take advantage of India’s ambition to build a semiconductor industry.
The key to fulfilling Anil’s dream of the chip-making industry in India is winning government funding, provided his broader empire is facing intense financial strain. Anil is trying to remove the burden of a massive debt piling in his commodity business. He is considering divesting a lower than 5% stake in Mumbai-listed Vedanta Ltd. as a last resort to reduce his borrowings. This news was reported by Bloomberg News last month. There have been no agreements regarding the venture discussions with Global Foundries Inc. and STMicroelectronics NV to license chip fabrication technology. Vedanta emailed and responded about its commitment to the plant and that it has identified a strong technology partner to widen this project’s aspect.
There has been no response to comments from Hon Hai, also called Foxconn. Global Foundries, STMicro and India’s Technology Ministry also didn’t give an immediate response. An estimated capital expenditure of $10 billion was taken into account while working on securing partners, for the Indian government, common people said. The government considers that figure inflated and later responded that $5 billion is much more appropriate to the original cost. If all incentive requirements are met, the government can pay up to half the cost of the project.
P M Modi’s administration has launched an ambitious $10 billion drive for local chip production, merging several countries along with the US to boost chip output and cur reliance on expensive imports and dependence on Taiwan and China. India still now plans to merge with major chip players shifting its base to South Asian nations. Another chip-making plan by a $3 billion investment for a fabrication unit in southern Karnataka state still stands stalled as the group’s technology partner Tower Semiconductor Ltd now awaits guidance from new parent Intel Corp., work to acquire more of the technology. Thus there is a huge demand for a proper technology partner along with the necessary investments to build up this semiconductor chip plant. Thus, from a broader perspective, the agreements await for response and tie-up. If funding is approved, India may see a new blooming chip-making market soon.
