RIL and HCL partnership will raise India’s semiconductor game

Two are India’s second largest conglomerates, Mukesh Ambani’s Reliance Industries, and Indian tech pioneer Shiv Nadar’s HCL Group (HCL Tech has clarified that the investment pertains to HCL Group, not a listed entity).

The pair is set to pick up a 26 to 51 per cent stake in the International Semiconductors Consortium (ISMC), one of the three applicants to have received the government’s nod to set up chip manufacturing plants under the government’s production-linked infrastructure. Incentive (PLI) Scheme for Manufacturing of Semiconductors in India.

You might also like

Read the specifics on the government’s big capital expenditure

Government targets lower after missing higher disinvestment target

What are the benefits of buying one policy for more than one vehicle?

Power Coal India profits from higher e-auction prices

Earlier this year, an agreement was signed by ISMC, a joint venture between Abu Dhabi-based Next Orbit Ventures and Israel’s Tower Semiconductor. 22,900 crore agreement with the Karnataka government to set up a chip-manufacturing plant on 150 acres of land in the Kochanahalli industrial area of ​​Mysuru.

Another venture being planned is Singapore-based IGSS Ventures, which plans to set up a $3.5 billion wafer plant in Tamil Nadu. But so far, speculation was on a joint venture between mining and energy giant Vedanta and Taiwan’s Foxconn, one of the world’s largest electronics contract makers, who have announced plans to set up one. 1,54,000 crore semiconductor plant in Gujarat, mainly due to deep pockets and solid experience brought in the venture by both the partners.

However, the entry of Ambani and Nadar changes the equation – not just for ISMC, but for India’s semiconductor manufacturing ambitions. Ambani is no stranger to giga-scale execution. Reliance operates the world’s largest integrated petrochemical refining facility in Jamnagar and Reliance Jio has rapidly become India’s largest telecom service provider. Nadar’s HCL Group brings together diverse technology sector experience – the group’s businesses from software services to hardware – as well as a deep understanding of the challenges of running a business in India.

As joint owners of a majority stake in the new venture, the two will not only add financial and performance muscle, but also design know-how and end-users. This development makes India’s semiconductor manufacturing bid risk-free as a whole.

Not that we haven’t tried before. But red tape, and lack of clear policy vision and support killed the earlier ventures. Back in the 1960s, American electronics maker Fairchild Semiconductor wanted to set up a manufacturing unit in India, but was defeated by foreign investment in the bureaucracy and inherent skepticism of the private sector. Later Bharat Electronics Limited (BEL) started manufacturing silicon transistors, but lacked the technology to progress in integrated circuits and collapsed.

BEL ventured into manufacturing silicon wafers in the 1980s in collaboration with Metchem, a venture of Mettur Chemicals (now part of the Sanmar Group) and a team of scientists from the Indian Institute of Science, Bangalore. However, that too went down, as the government failed to execute on its assurance of subsidized power.

In 1984, the center formed a wholly owned PSU – Semiconductor Complex Ltd – to manufacture silicon wafers, forming the basis for the manufacture of chips and integrated circuits. By 1987, SCL was only a generation behind the latest 800 nanometer (nm) technology and had already been achieved in the laboratory. But in 1989 a mysterious fire destroyed SCL and it never recovered. Today India is almost 12 generations behind the cutting edge of semiconductor technology.

Putting all the eggs in the Vedanta-Foxconn basket once again would have exposed the kind of risks India faced in the 1980s. Any kind of performance failure would have derailed the country’s plans, being underwritten with taxpayer money. But the entry of new and experienced players into the business significantly reduces the risk of delays due to performance failure.

It is also an endorsement of India’s PLI policy for semiconductor manufacturing. The government, having learned clearly from the past, swiftly amended the initial policy, which offered the highest subsidy of 50 percent for manufacturing advanced chips of 28 nm or less, and 28-45 nm and 45-65 nm. classified as low subsidies for nm chips. However, by revising the policy to a uniform 50 percent regardless of wafer size, the revised policy also encourages manufacturing of 45 nm wafers, which are most commonly used for chips used in the automobile and electronics sectors. .

Elsewhere in Minto

In Rai, Anil Baijal and OP Aggarwal explain how to make Delhi air less dangerous. Niharika Chopra explains how Europe’s strict ESG norms Impact on Indian companies Madan Subvanvis questioned whether India really needed to issue? sovereign green bond, long story profile india innovative equipment To fast track infrastructure.