The government is set to deny crucial funding for Anil Agarwal’s chip venture, a setback for a $19 billion push to make semiconductors in the country, as reported by news agency Bloomberg. Quoting sources privy to the development, Bloomberg said the Centre is likely to tell the venture between Agarwal’s Vedanta Resources Ltd. and Taiwan’s Hon Hai Precision Industry Co. it won’t get incentives to make 28-nanometer chips. The venture has applied for such assistance, potentially worth billions of dollars, but hasn’t met the criteria set by the government.
While Vedanta and Hon Hai can apply again, a rejection would mean delays for Agarwal’s ambition to set up India’s first major chipmaking facility, even as his metals and mining conglomerate struggles to reduce a heavy debt load.
Nine months after Agarwal announced the chip partnership to build India’s “own Silicon Valley,” the project is yet to find a technology partner or license manufacturing-grade technology for the 28nm chips it was seeking to build, the people said. At least one of those steps is needed for the venture to get government assistance.
Vedanta and Hon Hai, the assembler of a bulk of the world’s iPhones, have no previous significant experience in chipmaking. Their difficulty in finding production-ready technology underscores how hard it is to set up new semiconductor plants, massive complexes that cost billions to build and require very specialised expertise to run.
Prime Minister Narendra Modi has pledged $10 billion to woo chipmakers to India, promising his administration will bear half the cost of setting up all semiconductor sites.
Vedanta has previously said its partner Hon Hai had secured “production-grade, high-volume” 40nm technology and “development-grade" technology for relatively more sophisticated 28nm chips. That’s likely not enough for the government to award the funding, as the venture had applied to actually produce 28nm chips, the people said.
The government may soon ask Vedanta to submit a new application for financial support to make 40nm chips, and give a revised capital expenditure estimate. Such a bid could be considered after the Centre reopens the application process for incentives, part of a push to lure prospective chipmakers into the country that’s yielded little success so far.