In Short:
The Indian government plans to allocate up to $10 billion for its Semiconductor Mission, which is nearly running out of funds from its initial $11 billion. This new funding aims to support a major chip fabrication unit proposed by Tower Semiconductor and the Adani Group in Maharashtra, which will produce 80,000 wafers monthly. The project is part of India’s push to boost semiconductor manufacturing.
The Indian Semiconductor Mission is poised to receive a second budgetary allocation of up to $10 billion, according to a senior official. This funding is anticipated to support the approval of a significant chip fabrication unit proposed by Tower Semiconductor in collaboration with the Adani Group, alongside several other proposals currently under evaluation, as indicated by senior officials familiar with the situation.
The government is seeking additional funding for the ISM initiative, having nearly exhausted the funds from its initial phase, which allocated $11 billion. This funding included approvals for the chip fabrication unit announced by the Tata Group as well as four other chip assembly proposals.
Recently, the Maharashtra state government approved a substantial investment of $10 billion for the semiconductor fabrication unit involving the Adani Group and Tower Semiconductor located in Panvel, which is projected to have a production capacity of 80,000 wafers per month.
An official noted that New Delhi is currently awaiting a formal proposal from Tower, in partnership with the Adani Group. Although there has been informal communication regarding this collaboration, an official proposal remains forthcoming.
The ISM, established within the Digital India Corporation in 2022, aims to enhance the country’s semiconductor manufacturing, packaging, and design capabilities, originally with a budget of $10 billion.
A representative indicated that the second phase of the ISM will soon commence, with an allocation likely mirroring that of the previous phase, as two additional proposals are expected to receive approval.
The official explained that with Tower securing a joint venture partner in the Adani Group and having received state government approval, the next step involves the formal proposal being reviewed by the ISM, which will then proceed to make a decision based on technical criteria.
The ISM initiative enables the Central government to offer nearly 50% capital subsidy, while the state government where the plant is situated contributes an additional 15-25%, though specifics on the subsidy articulated by the Maharashtra government remain unclear.
Neither the Adani Group nor Tower Semiconductor has responded to inquiries from Economic Times regarding this matter.
In an announcement made on social media platform X, Devendra Fadnavis, the Deputy Chief Minister of Maharashtra, confirmed the approval of the $10 billion investment proposal by Tower and the Adani Group for establishing a chip fabrication unit in Taloja, Panvel.
The semiconductor manufacturing unit is set to be located in the suburbs of Navi Mumbai, specifically in the Raigad district, and will have an initial capacity of 40,000 wafer starts per month (WSPM), scaling up to a total capacity of 80,000 WSPM.
Of the total investment, Rs 58,763 crore will be allocated in the first phase, followed by Rs 25,184 crore in the subsequent phase, as confirmed by Fadnavis.
Strong Ties
The Adani Group maintains robust connections with Israel across various sectors. For instance, its ports and SEZ division operates and manages the second-largest port in Israel, the **Haifa Port**. Moreover, it collaborates with Israeli firm Elbit Systems to manufacture small arms, ammunition, and drones for the armed forces, facilitated by a technology transfer from Elbit to the Indian conglomerate.
Sources suggest that the Adani Group aims to replicate this technological collaboration with Tower Semiconductor in their semiconductor initiative.
Parv Sharma, a senior analyst at Counterpoint Research, remarked that the partnership with Tower is promising for the Adani Group, as it brings expertise that will be complemented by local capabilities. “This investment is significant as it marks the second fab in India following the Tata Group’s venture. It is expected to focus on mature nodes similar to Tata’s fab with PSMC, possibly leading to advancements,” he stated.
Sharma emphasized that the essential factor in setting up a fabrication unit is the availability of capital, an area where the Adani Group excels, making this a strategic investment for them.
Under the ISM, the government has already sanctioned a $11 billion proposal to establish a semiconductor fabrication unit by Tata Electronics in Dholera, Gujarat.
Additionally, three other OSAT/ATMP facilities have received approval, including one from Idaho-based Micron Technology, which has secured permission to establish a plant in Gujarat’s Sanand. Micron is expected to launch its first made-in-India chips next year.
Approval was granted to Tata Electronics earlier this year for an OSAT in Morigaon, Assam. Simultaneously, CG Power of the Murugappa Group received the green light for an OSAT in Sanand, Gujarat.
Tower’s Plans
The central government has been reviewing a standalone proposal from Tower Semiconductor for some time. Tower was among the initial companies to express interest in establishing a semiconductor fabrication unit in India, even before the semiconductor mission was initiated in December 2021. However, its proposal encountered various hurdles, including a failed acquisition attempt by Intel and unsuccessful partnerships with Next Orbit Ventures and the BC Jindal Group.
As a leading manufacturer of analog semiconductor chips, Tower previously assisted the Indian government in planning the 180 nm chip plant at the Semiconductor Laboratory in Mohali and was also in line for the overhaul of that facility.
Analysts contend that the Adani Group’s entry into the semiconductor domain aligns with the trend of numerous Indian conglomerates diversifying into advanced technologies and consumer-facing sectors. The success of Reliance in telecommunications and its recent ventures into AI and cloud infrastructure exemplify this trend, while the Adani Group is also expanding into digital and green energy sectors.
“Engaging in such sectors is a rational decision for companies of this magnitude, given their substantial capital, resources, logistical and technical expertise, and access to top talent — all crucial in advanced technology sectors,” added Sharma.
