India's ambitious plan to establish itself as a global manufacturing hub for semiconductors is gaining traction, as the government evaluates $21 billion worth of proposals from various companies. With countries like the US, Japan, and China investing heavily in domestic chip capabilities, India aims to reduce its reliance on expensive imports and boost its growing smartphone assembly industry.

Progress in the Semiconductor Sector:

Semiconductors have emerged as a crucial geopolitical battleground, and Prime Minister Narendra Modi is keen on positioning India as a major player in this sector. Tower Semiconductor Ltd., an Israeli company, has proposed a $9 billion plant, while India's Tata Group has put forward an $8 billion chip fabrication unit. Both projects are expected to be located in Gujarat, the home state of Prime Minister Modi. The government now faces the task of determining how to allocate taxpayer support between foreign chipmakers, local champions, or a combination of both.

India's Incentive Plan and Previous Efforts:

Under India's chipmaking incentive plan, the government will bear half the cost of approved projects, with an initial budget of $10 billion allocated for this purpose. However, India has faced challenges in this domain in the past. The high-profile partnership between local firm Vedanta Resources Ltd. and Taiwan's Foxconn Technology Group failed to find a suitable partner for chip design technology. Nevertheless, the government-controlled project in the northern part of the country continues to produce small quantities of mature-technology chips.

Success Stories and Future Prospects:

Despite these setbacks, the Modi administration's financial incentives have attracted major technology players to invest in India. Apple Inc. has been able to manufacture and export billions of dollars' worth of iPhones from India, thanks to these incentives. Additionally, Google is preparing to assemble phones in the country this year. The semiconductor fund has also facilitated the establishment of a $2.75 billion assembly and testing facility by US memory maker Micron Technology Inc. in Gujarat. Dholera, a town in Gujarat, is being developed as a potential hub for chip manufacturing.

Tata's Ambitions and Partnership Possibilities:

The Tata conglomerate, with its plans to invest billions of dollars in high-tech businesses, is expected to partner with Taiwan's Powerchip Semiconductor Manufacturing Corp. for its chip fabrication project. Talks have also been held with United Microelectronics Corp. Tata's facilities, like Tower's, will focus on producing mature chips, widely used in consumer electronics, automobiles, defense systems, and aircraft. Additionally, Tata is planning to build a chip-packaging plant in eastern India, with a target of assembling and exporting chips for automakers.

Government Approval and International Partnerships:

All the chip proposals will require approval from Prime Minister Modi's cabinet, which is expected to be granted within weeks. Applicants will need to disclose detailed information about their technology partnerships, financing plans, chip types, and target customers. India's geopolitical significance, coupled with its stable democracy and growing tech center, positions it as an attractive partner for international investors, particularly in light of the ongoing trade tensions between the US and China.

With financial incentives in place and partnerships with international companies, India is poised to become a formidable player in the semiconductor sector, bringing economic growth and technological advancements to the country.