Chip consortium ISMC to invest $3 billion to set up 65nm fab in Karnataka

Karnataka has signed a memorandum of understanding (MoU) with chip consortium ISMC to set up a 65nm Analog Semiconductor Fabrication plant in the state with an investment outlay of Rs 22,900 crores ($3 billion). ISMC has asked the state government to allocate 150 acres of land for the fab in the Kochanahalli Industrial area of Mysore.  

The MoU was announced in the backdrop of the first SemiconIndia 2022 event, held in Bengaluru, Karnataka. Several MoUs were announced during the three-day event, which was inaugurated by Prime Minister Narendra Modi on April 29. Seven MoUs were signed on the third day of the event. 

A team from ISMC met the chief minister of Karnataka Basavaraj Bommai earlier today. The MoU was signed by Ramana Reddy, additional chief secretary to the Government of Karnataka, and Ajay Jalan, director of ISMC.

ISMC claims it will be India's first and largest fabrication unit under the Central Government’s Semiconductor Mission, which was announced in December along with a Rs 76,000 crore production linked incentive (PLI) scheme. 

The Karnataka fab is expected to generate more than 1500 direct and 10,000 indirect employment opportunities and will fuel the development of an ancillary semiconductor ecosystem, ISMC said. 

“The uptick in Indian investment in semiconductors coincides with the global demand for semiconductors amid a shortage expected to run through 2025. We have suggested an Electronics and Systems Design cluster in Mysuru as the investment destination for ISMC," Reddy said in a statement. 

ISMC is a joint venture between UAE-based Next Orbit Ventures Fund (NOVF) and Tower Semiconductor, which is being acquired by US chip giant Intel for $5.4 Billion. 

Karnataka chief minister Basavaraj Bommai called the MoU a "significant agreement amid the competition among various states to attract semiconductor fabs."

Early this year, Anil Agarwal led Vedanta Group also announced its plans to invest up to $20 billion in an electronic chip and display manufacturing unit in India. 

Following the announcement, the company had told the media that it plans to spend $10 billion on display manufacturing and $ 7 billion on semiconductors, which may go up to another $3 billion. 

Vedanta is reportedly surveying locations for the plant in several states including Tamil Nadu, Telangana, Himachal Pradesh, and Maharashtra. 

"We have been offered land by various state governments to set up manufacturing facilities. Our SPV with Foxconn will be key given their expertise and experience," 

Akarsh Hebbar, managing director of Display and Semiconductor Business, Vedanta said in a statement. 

The covid-19-led supply chain disruption has led to a massive shortage of chips across industries. The shortage is unlikely to resolve anytime soon. However, it has spurred governments and chip companies to reduce dependence on a single country for the supply of chips. Like India, the US and Japan are encouraging chip companies to set up plants closer to home. Japan is in talks with TSMC for a fab, while in the US, Intel is spending $20 billion to set up a 1,000-acre chip manufacturing facility in Ohio. 

Raja Koduri, executive vice president, Intel pointed out that the intensity of the government and the entrepreneurs here at SemiconIndia has been amazing. "I am confident much of what is being discussed will be achieved by the government. It's exciting times ahead for the chip design and manufacturing sector in India and will continue to be in times to come," he added. 

India can become one of the leading suppliers of materials, equipment, and services in the global semiconductor space and account for $85-100 billion out of a $550-600 billion global market by 2030, according to the Global Semiconductor Manufacturing Supply Chain report, published April by Indian Electronics and Semiconductors Association (IESA). Early this month, IESA also signed an MoU with the US chip body Semiconductor Industry Association (SIA) to boost collaboration between the two countries.