The government will have to seek fresh funding under the ISM as it has almost exhausted the funds in the first phase which saw approvals of $11 billion, they added.
This includes the chip fabrication unit announced by the Tata Group as well as four other proposals for chip assembly.
On Thursday, the Maharashtra state government approved a $ 10 bn semiconductor fab unit by the Adani group and Tower to come up at Panvel, it is estimated to have a capacity to produce 80,000 wafers monthly.
An official cited above said that New Delhi is awaiting a formal proposal from Tower with Adani Group as a partner. While ( we) were informally told about the possible alliance, a formal proposal is yet to follow, the person added.
ISM, a division within the Digital India Corporation tasked with furthering the country’s semiconductor manufacturing, packaging, and design capabilities was first established in 2022 with a budgetary allocation of $ 10 billion.
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“The second phase of ISM will be launched soon; the allocation will be around the previous phase. Two more proposals are expected to get approvals,” said one official quoted above.“Now that Tower seems to have a joint venture partner (Adani) and a state government approval (Maharashtra), the final details of their proposal will be vetted by the ISM and then a final call will be taken based on the technical criteria,” the official said.
He pointed out that there are several other proposals under consideration including ones focused on assembly of semiconductor chips, “if the Centre has to provide subsidy for the Adani-Tower proposal then it has to again ask the Finance ministry for fresh funds,” the official added.
Under the ISM initiative, the Central government provides close to 50% of capital subsidy above which the state government where the plant is coming up gives another 15-25%.
The quantum of subsidy approved by the Maharashtra government is however unclear as of now.
The Adani Group and Tower did not immediately respond to ET’s request for comment.
Late on Thursday night, Maharashtra’s deputy chief minister Devendra Fadnavis, announced on social media platform X that his state had approved a $10 billion (Rs 83,947 crore) investment proposal by Tower and Adani Group to set up a chip fab unit at Taloja in Panvel.
The semiconductor manufacturing unit, in the Navi Mumbai suburbs in Raigad district, will have a total capacity of 40,000 wafer starts per month (WSPM) in the first phase and an overall capacity of 80,000 WSPM.
Of the total investment in the project, Rs 58,763 crore will be infused in the first phase and the remaining Rs 25,184 crore in the second phase, Fadnavis said.
Strong Ties
The Adani Group has close ties with Israel on multiple fronts. Adani Ports and SEZ arm operates and maintains the second largest port in Israel – the Haifa Port. It also has a partnership with Israeli company Elbit Systems under which Adani’s defence and aerospace arm makes small arms and ammunition along with drones for the armed forces. This partnership operates based on transfer of technology by Elbit to the Indian conglomerate.
The Adani group is looking to replicate the same in its partnership with Tower under the semiconductor project where complex technology will be brought in by Tower, sources said.
Parv Sharma, senior analyst at Counterpoint Research said that the partnership with the Israeli Tower is one that bodes well for Adani as they will bring the expertise and can be supported here in India by the Adani Group’s capabilities. “This is a significant investment as it marks the second fab in India after the Tatas. It will likely be for mature nodes, like the Tata fab with PSMC, that will eventually lead to more leading (or advanced) nodes.”
“One of the crucial things when it comes to setting up a fab is having the wherewithal in terms of capital and that is something that the Adani Group has and that is what makes this something that is a smart investment decision on their part,” he added.
Under the ISM project, the government has so far approved a $ 11 billion proposal by Tata Electronics to set up a semiconductor fabrication unit which is coming up in Dholera, Gujarat.
It has also approved three other OSAT/ATMP (Assembly, Testing, Marking and Packaging) facilities including one from Idaho-based Micron Technology, which received an approval in June 2023 for a plant in Gujarat’s Sanand. Micron will roll out its first made-in-India chips next year.
Tata Electronics received an approval in February this year to set up an OSAT in Assam’s Morigaon, while the Murugappa Group’s CG Power received the green light around the same time to set up an OSAT in Sanand, Gujarat.
Last week the Cabinet also approved a chip assembly unit by Mysore based Kaynes Technology, which will be set up in Sanand, Gujarat with an investment of Rs. 3,307 crores.
Tower’s Plans
The centre has been evaluating a solo proposal by Tower for a while now, the official said. Tower was one of the first companies to show interest in setting up a semiconductor fab in the country – much before the semiconductor mission was launched in December 2021. The company’s proposal however hit multiple roadblocks — the first being its aborted acquisition bid by Intel along with several failed partnership attempts with Next Orbit Ventures and later BC Jindal Group.
Counted among the world’s leading manufacturers of analog semiconductor chips, Tower has earlier helped the Indian government plan the 180 nm chip plant at the Semi-Conductor Laboratory in Mohali. It was also in the fray for the overhaul of the Mohali unit.
Analysts are of the view that the Adani group’s entry into the semiconductor space is no surprise as several Indian conglomerates are actively looking to diversify their businesses into advanced technology and consumer facing sectors.
“With Jio, Reliance has managed to penetrate the telecom space and has also recently got into the AI and cloud infrastructure space. When it comes to Adani, they too have been working to enter new segments with more digital-facing offerings like Adani One and the green energy space,” according to Sharma.
“ Getting into such sectors is a natural choice for companies of this scale and size as they have the capital, resources, logistical and technical know-how and access to top talent, which is needed in these advanced tech sectors, he added.
