Indian startup foundry attracts OPPO and VIVO to produce chips in India

Latest update time：2022-05-12

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Vedanta Group is in active talks with smartphone brands Oppo and Vivo, laptop makers and electronic equipment manufacturers for semiconductor chips that it plans to roll out from its soon-to-be-announced semiconductor plant in India, Vedanta business unit head Akarsh Hebbar reportedly said.

In January, Vedanta announced a partnership with Taiwanese electronics maker Foxconn for a multi-billion dollar semiconductor manufacturing initiative that would tap into a $10 billion incentive package unveiled by the Centre late last year.

“We have already started talking to customers and developing MoUs with them,” Akarsh Hebbar, global managing director of Vedanta’s display and semiconductor business unit, told ET.

While Hebbar characterized the conversations as “preliminary,” he said brands such as Oppo and Vivo, as well as some in the automotive industry, have shown strong interest in semiconductor wafers.

He said smartphones, besides other home appliances, use wafers in the 28-65 nm category and Vedanta’s area of interest is also in this segment.

Email queries sent to Oppo and Vivo remained unanswered as of press time.

Although Vedanta has partnered with Foxconn, one of Apple's largest suppliers, supplying chips to Apple is not the company's immediate goal because Apple's phones require smaller chips.

But Hebbar said the 28 to 22 nm nodes they initially planned to build at will be used by other smartphone makers.

Sources within the government said having an end customer for its chips would also give the government more confidence when assessing its subsidy proposals.

As for Foxconn, Hebbar said the Taiwanese company produces semiconductor chips in the 45-68nm area but accounts for a much smaller share of the company's $215 billion in consolidated sales.

Vedanta hopes that once the factory is announced and work begins, there will be more interest from the chip-consuming ecosystem, such as equipment makers, he said.

The group is in talks with several states, including Gujarat, Maharashtra and Telangana, to set up its semiconductor plants in India.

Hebbar said Vedanta had technically evaluated the offers from Gujarat, Maharashtra and Telangana and found them “attractive”.

For semiconductor plants, high-fidelity power, water supply and talent pool are crucial, which will create pressure when Vedanta decides to set up the plant.

The Centre said it will contribute up to 50% of the project cost under its Rs 76,000-crore Semicon India scheme, under which ISMC Digital recently announced it would set up a plant in Karnataka. Singapore-based IGSS is another applicant for incentives for semiconductor plants under the scheme.

An advisory committee set up by the Ministry of Electronics and IT, including pioneers such as Intel veteran Vinod Dham, announced in December 2021 to promote indigenous semiconductor manufacturing, will contribute to this effort.

India's semiconductor ambitions

Indian Prime Minister Narendra Modi isn’t known for keeping his head down and quietly working toward his goals. Fanfare and enthusiastic speeches are more his thing. The latest example: His speech at the Semicon India 2022 conference in late April, in which he positioned India as a potential semiconductor manufacturing hub.

However, this goal may require some humility and patience, especially when major economies such as the United States, Germany and Japan have already attracted large investments from top chipmakers. Unlike manufacturing powerhouse China, which is also vying to become a major global chipmaker, India lacks a strong domestic chip market.

India’s semiconductor market is estimated at $15 billion in 2020 and could reach $63 billion by 2026, according to the government. That’s small by global standards: Some industry executives expect the global market to reach $1 trillion by 2030. India currently relies on overseas manufacturers for nearly all of its semiconductor needs, despite previous failed attempts by the government to foster an industry at home.

As a severe chip shortage emerged last year, India decided to re-enter the fray, announcing a $10 billion incentive package to attract display and semiconductor makers. But such a package does not guarantee the interest of the world’s top players — especially as the United States and Europe are prepared to spend several times that amount.

So far, the country has received proposals worth $20.5 billion from five companies. These include a joint venture between Indian oil and gas giant Vedanta and Foxconn, Singapore's IGSS Ventures Pte, and ISMC, a joint venture between Abu Dhabi's Next Orbit Ventures and Israel's Tower Semiconductor. Many of the world's top chipmakers, such as TSMC and Samsung, are noticeably absent -- although Intel is in the process of acquiring Tower Semiconductor.

India has proven itself in smartphone assembly, now the second largest after China. Understandably, it wants to move up the value chain — but cheap labor is not enough. Chipmaking is a technology- and capital-intensive industry that requires, at the very least, a reliable supply of electricity and water, which the Indian government has often struggled to provide in the past.

Mr. Modi’s rhetoric aside, getting on the map and partially meeting India’s own domestic needs within the next 10 years seems a reasonable goal — in addition to focusing on the value chain in chip design and assembly, testing and packaging. It’s no surprise that the Indian government wants to seize the moment. But here, the adage of learning to walk before you run seems apt.

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