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IT ministry squints at operational factors as industry hopes for speedy approval

Nearly six months after the government closed the first set of applications for setting up semiconductor and display fabs in the country, several considerations are weighing against final approvals for the multi-billion-dollar projects, which require significant incentives from both the Centre as well as states.

The Ministry of Electronics and IT is looking for clear visibility into financial closure, including the capability to bear expenses over the first five years of operation, ministry officials directly aware of the discussions with applicants said.

A host of other operational factors, too, must be addressed before final approvals, they added.

“A semiconductor plant requires a huge investment and very careful planning. It is not a unit which can start production in one or two years. Right now, we have to think about factors such as housing of staff, supply of adequate raw material, and ultra-pure water. There are too many moving parts,” a senior ministry official said, requesting anonymity.

Since several issues have to be worked out, it would be difficult to put a timeline on when the project approvals will come through, the officials said.

A consortium comprising Dubai-based NextOrbit and Israeli tech firm Tower Semiconductor has already signed a deal with the Karnataka government for a plant in Mysuru.

“We have requested the government to have the approvals granted by August, so we can move forward with project execution,” said a person involved in negotiations for ISMC Analog Fab, the NextOrbit-Tower consortium.

In February, the IT ministry said it had received three applications for setting up semiconductor fabrication units in the country.

Besides ISMC, mines and metals conglomerate

has tied up with Taiwanese electronics giant Foxconn to build a factory in India.

While ISMC has zeroed in on Karnataka, the Vedanta-Foxconn venture is still on the hunt for a location. Singapore-based IGSS Ventures, which has also been selected, has also not finalised its factory location.

Industry executives, however, hope the approvals would start coming in over the next 6-8 months.

The location of the plant, financial closure and presence of a tech partner are key considerations for the Centre, besides other essentials such as uninterrupted power, abundance of pure water, and talent supply, said K Krishna Moorthy, chief executive and president of the India Electronics and Semiconductor Association.

Foxconn chairman Young Liu had met with Prime Minister Narendra Modi and senior ministry officials on the group’s plans on a range of new-tech areas including semiconductors.

Vedanta’s business unit chief for semiconductors Akarsh Hebbar, in an interview earlier that Gujarat, Maharashtra, and Karnataka remain under consideration for the joint venture.

As the ministry hammers out approvals for the proposals, consumers of semiconductor wafers – a gamut of manufacturers including two-wheeler maker – have said that the reduced semiconductor supply has hit business.

TVS has said that it has cut production and sale of some of its premium two wheelers, and that the company was scouting for “alternative sources” to bridge the gap.

In December, the Union Cabinet had approved a Rs 76,000-crore incentive plan to encourage semiconductor, display manufacturing and fabrication units in India. As part of the plan, incentives have been planned for silicon semiconductor fabrication, packaging, design, display fabrication, compound semiconductor and silicon photonics manufacturing units.

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