Over the past year, the Indian government has consistently made announcements about establishing fabrication units in the country. However, the anticipation of India’s first commercial fabrication unit still lingers without a concrete development.

In March earlier this year, Union IT minister Ashwini Vaishnaw said that India’s first semiconductor fab would be declared in just a ‘few weeks’. However, nothing materialised.

Again, in July, in an interview with The Economic Times at Semicon 2023, the minister said that his government will approve two high-quality semiconductor chip fabrication proposals in the next 12 months.

Speaking recently on the sidelines of AMD’s inauguration of its largest global design centre in Bengaluru, Vaishnaw said, “India may get three more semiconductor chip fabrication units in the next few months.”

Not only Vishnaw, but also his deputy Rajeev Chandrasekhar has made similar claims. In June, Chandrasekhar claimed that a 40 nm fab would soon be announced, but again, nothing materialised.

Tall promises or work in progress?

India’s ambitions to set up fabrication units have dragged on for a while. In December 2021, the Central government announced a budget of USD 10 billion as incentives to attract chip makers and promote the domestic manufacturing of semiconductors and establish a robust semiconductor ecosystem in India.

Within a few months, India’s prospect looked viable, with three different parties showing interest, most notably the joint venture between Indian conglomerate Vedanta and Taiwanese contract manufacturer Foxconn. Yet, for different reasons, all three deals were called off.

Arun Mampazhy, semiconductor analyst, points out that the IT minister also claimed, back in 2020, that all the applications were good, including Vendanta’s.

“We are aware that none of them received approval; they were all rejected. However, it wasn’t after eight or nine months, as claimed by the minister, but almost 15 or 16 months later. In May 2023, the government finally suggested reapplying, essentially implying rejection. This marks the first broken promise, as nothing transpired within the promised timeframe of one to nine months, and none of the proposed ideas were approved,” he told AIM.

But in October, Chandrasekhar did meet with Russell C. Ellwanger, CEO of Israel-based Tower Semiconductors, to explore the potential of setting up a fab in India.

While details of their discussion remain undisclosed, there is speculation about the prospect of an Indian company, such as Reliance Industries, collaborating with Tower to establish a fab in the country.

Moreover, Dutch semiconductor designer and manufacturer NXP Semiconductor has shown interest in setting up a fabrication in India, given the semiconductor ecosystem develops in the country.

Micron is not building a fab in India

However, besides the Micron deal, India has nothing concrete to show. The US-based semiconductor company earlier committed to set up a USD 2.75 billion semiconductor assembly and test manufacturing facility in India.

Previously, Vaishnaw told Forbes India that, “By December 2024, we should see the first made-in-India chip coming out of the Micron plant.”

But Micron is setting up a packaging and assembly unit, and calling the chips assembled at its plant would be an exaggeration, according to Mampazhy.

“Micron is primarily a packaging facility, contributing about five to six percent of chip value through packaging. Asserting it as a wholly indigenous chip based on this modest value addition seems an exaggeration. The claim of being the first indigenous chip or a ‘Made in India’ chip is too much of an exaggeration in my opinion,” he said.

Additionally, Mampazhy highlights that Sahasra Semiconductors was the first company to manufacture the first ‘Made in India’ chips commercially. Disregarding Sahasra and attributing the label of ‘Made in India’ solely to Micron’s chips is perplexing.

Nonetheless, the government is banking on the Micron deal to entice additional outsourced semiconductor assembly and test (OSAT) vendors to India. Furthermore, Vaishaw has previously asserted that, following the establishment of an assembly unit, Micron will eventually establish a fabrication facility in India as well, considering it a natural progression.

Reportedly, Kaynes Technology, CG Power and Industrial Solutions, and Tata Group are all planning to set up semiconductor assembly units in India. Kaynes Semicon, a subsidiary of Kaynes Technology will invest INR 2,800 crore to set up a semiconductor OSAT and compound semiconductor facility at Kongara Kalan near Hyderabad.

Similarly, CG Power and Industrial Solutions, under the Murugappa Group, said in a stock exchange filing that they have also applied to set up an OSAT unit in India.

Tata Group, on the other hand, established Tata Electronics in 2020, to explore the realms of semiconductor technology. For them, the plan now is to set up an OSAT unit; however, they might look to set up a fabrication facility in the future in partnership with global players, similar to the Vedanta-Foxconn JV.

These are positive developments, and the interest of global players like NXP in India is a favorable sign. Despite setbacks, India seems to be moving in the right direction.