American chip giants are betting on this country

The CEOs of some of the top U.S. semiconductor companies heaped praise on India's tech sector at an event attended by Prime Minister Narendra Modi on Friday, as the world's fifth-largest economy looks to bring its own Positioned as a global chip powerhouse.

Micron Technology CEO and senior executives from Cadence, AMD and Applied Materials joined Modi on stage at SemiconIndia to talk about their investments in the Indian chip market. Ajit Manocha, CEO of US industry group SEMI, also attended the meeting.

"For the first time in India's history, geopolitics, domestic policies and private sector capacity are aligned in favor of India becoming a player in semiconductor production," Manocha said in a keynote speech.

"We'll look back at 2023 ... as a landmark year where things are starting to take shape."

The event, attended by some of the world's largest chip companies, underscored India's ambitions to become a major hub for semiconductors, alongside countries such as the United States, Taiwan and South Korea.

India’s chip strategy consists of two parts. The first is to attract foreign companies to do business and invest in the country, and the second is to form alliances with other major semiconductor countries such as the United States

New Delhi has introduced support policies for the semiconductor industry. In December, the government approved a $10 billion incentive package for the semiconductor industry. This is also open to foreign companies.

Last month, Modi visited the United States and said India would cooperate with the United States in semiconductors and other fields.

At SemiconIndia, participating U.S. chip companies talked about their investments in India and announced new investments, highlighting India's emphasis on attracting foreign companies.

AMD said it plans to invest about $400 million in India over the next five years. These include a new campus in Bengaluru that will become the company's largest design center.

"The Indian team will play a key role in advancing artificial intelligence machine learning and hardware and software capabilities," AMD Chief Technology Officer Mark Papermaster said during Friday's keynote.

Last month, Micron announced plans to build a semiconductor assembly and test facility in the Indian state of Gujarat. Micron Technology's total investment will reach $825 million.

"We hope this investment will help catalyze other investments in the industry, enhance local manufacturing capabilities, encourage innovation and support the creation of broader employment opportunities.”

India's Information Technology Minister Ashwini Vaishnaw said on Friday that construction of the plant would begin "soon".

Another notable attendee was Liu Yang, chairman of Foxconn, the Taiwanese company that assembles Apple's iPhones. Foxconn has made a big push into the semiconductor field in the past few years.

Foxconn made its biggest push last year when it struck a deal with Indian metals and oil group Vedanta to build a semiconductor and display production plant in India as part of a $19.5 billion joint venture. However, Foxconn pulled out of the venture this month, dealing a blow to both the company and India's ambitions.

That doesn't seem to be stopping either company, though. Mr Liu's presence at the event signals Foxconn's ambitions to invest in India. Liu told CNBC-TV18 on Friday that Foxconn plans to invest $2 billion in India over the next five years.

Vedanta Group Chairman Anil Agarwal said at the SemiconIndia show on Friday that the company has "identified world-class technology partners and are working with them" in the semiconductor space.

The high-profile event, which brought together all the CEOs, masked some of the challenges India faces in the semiconductor industry.

Pranay Kotasthane, deputy director of the Takshashila Institute, said one area that could be attractive to India is packaging and testing of semiconductors. This requires a relatively low-skilled workforce but requires significant capital investment, which India can have. However, no major Taiwanese company has set up a factory in India yet in this market segment.

"The lack of policy coherence and high import tariffs are bottlenecks that prevent Taiwanese companies from making progress," Kotastan said.

At the same time, in the world of foundries (companies that actually make semiconductors), there are not yet good technology partners for companies trying to open factories in India. The chip manufacturing tie-up between Vedanta and Foxconn reportedly relies on technology from European semiconductor company STMicroelectronics.

“No fab proposal has found a good technology partner yet,” Kotastan said.

Still, analysts point to India's huge domestic market and other factors such as incentives as reasons for optimism about the country's chip market.

On Friday, Modi praised India's credibility.

"Skilled engineers and designers are our strength. Anyone who wants to be part of the most dynamic and unified market in the world should have full confidence in India," the Indian Prime Minister said.

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