Tower Semiconductor’s $11B project likely to be approved after polls

Israel-based Tower Semiconductor’s $11-billion (Rs 91,000-crore) fabrication project, is now likely to be approved only after the general elections, official sources said.

This is because the ministry of electronics and IT (Meity) will first have to seek Cabinet’s approval for raising the current incentive ceiling of Rs 76,000-crore for domestic semiconductor manufacturing. With the government already approving four chip projects so far, incentives worth Rs 60,000 crore have already been committed.

Tower Semiconductor’s project is currently under evaluation stage. As per the process, companies whose applications are approved are entitled for a 50% subsidy from the government on the project cost. State governments where the projects are set up are free to further top this up with any subsidy amount they want.

Going by the size of Tower’s project, the government would have to bear around Rs 45,000 crore of the total project cost, but currently only Rs 16,000 crore is left in the subsidy kitty, officials said.

Even though the government disburses subsidy for the approved projects over several years, officials said that it’s prudent to first seek hike in the outlay and then accord proposal to the project.

“The one proposal that did not go to the Cabinet today (February 29) was Tower. It is a very important proposal that the government is examining and hopes to successfully get approved,” Rajeev Chandrasekhar, minister of state for electronics and IT had said in a media briefing last week.

“It is a slightly more complex proposal because they looked at a longer period of build out. It’s a much larger fab that they are building. And it is one of the few foundry-led investments that is coming into the country,” Chandrasekhar added.

Unlike a joint venture model, Tower is looking at setting up fabrication unit solely in the country, with a planned significant capacity of 80,000 wafers a month. The company is expected to explore partnership at a later stage.

“As per the current plan, we need two silicon fabs of higher nodes, of which one (Tata-PSMC fab project) has happened. We may require one or two more ATMP (assembly, testing, marking, and packaging) plants,” said Ajai Chowdhury, chairman EPIC Foundation and co-founder of HCL.

Chowdhury, who is also an advisor to the India Semiconductor Mission (ISM), said, “semiconductor is a 20-year vision and so we will definitely see additional funding coming in for this area beyond the Rs 76,000 crore”.

Including the Micron’s Rs 22,500 crore project which was approved last year, the total value of projects as on date stands at Rs 1.49 trillion. Last week, the government approved the country’s first Rs 91,000 crore semiconductor fabrication proposal by Tata Electronics in partnership with Taiwan-based Power Semiconductor Manufacturing Corp (PSMC).

The other major project to be approved was also by the Tata Group – the Rs 27,000-crore ATMP project by Tata Semiconductor Assembly and Test. The third, which carries an investment of Rs 7,600 crore was of CG Power in partnership with Japan-based Renesas Electronics and Thailand’s Stars Microelectronics.

The first fab project that will manufacture higher compute chips with 28 nm technology will be set up in Dholera, Gujarat for which the construction is expected to start in the next 100 days. The fab will have a capacity of 50,000 wafers per month, and produce 300 crore chips every year, which will cater to industries like high-performance computing, electric vehicles, defence, and consumer electronics, among other things.

The ground breaking ceremony of the three approved semiconductor projects is expected next week. Financial Express