Major setback as ISMC's India chip plan stalls post Tower-Intel deal

India's plans to establish a $3 billion semiconductor facility by chip consortium ISMC, in partnership with Israeli chipmaker Tower, have been stalled due to Intel's ongoing takeover of Tower, according to three sources.

Another major plan, a $19.5 billion joint venture between India's Vedanta and Taiwan's Foxconn, is also progressing slowly as talks to involve European chipmaker STMicroelectronics as a partner have reached a deadlock, as per a fourth source. These setbacks pose a significant challenge to Prime Minister Narendra Modi's goal of making chip manufacturing a priority to attract global companies and usher in a new era in electronics manufacturing.

India, anticipating its semiconductor market to reach $63 billion by 2026, had received three applications for setting up chip plants under a $10 billion incentive scheme last year. The Vedanta-Foxconn JV planned to build a plant in Gujarat, while ISMC and IGSS Ventures committed $3 billion each for plants in separate southern states. However, the ISMC consortium's plans have been put on hold due to Intel's acquisition of Tower, pending regulatory approvals. Tower is expected to reassess its participation based on the progress of its deal talks with Intel.

Regarding the Vedanta-Foxconn JV, although they had secured STMicroelectronics as a licensing technology partner, India's government expressed its desire for STMicro to have a stake in the partnership. However, STMicro is not interested in that arrangement, and the talks are currently in limbo. The JV is struggling to finalize a technology partner, according to India's deputy IT minister.

In an effort to revive investor interest, India's IT ministry has announced that applications for chipmaking incentives will be re-invited, with an extended deadline until December next year. The ministry expects both current applicants and new investors to apply in this phase.