Since last year, billionaire Anil Agarwal has been struggling to find financial backing for a planned semiconductor factory in India. But according to Bloomberg UK, as of March 10, India has renewed the call to revive its efforts to lure prospective investors to fund Mr Agarwal’s slow-moving plan.
New Delhi is piling on the pressure for Indian semiconductor projects such as Mr Agarwal’s to get off the ground despite an initial poor round of funding. This is because of how this could benefit the Indian semiconductor scene as well as what it could mean for another South Asian country to interrupt the increasingly worrying monopoly China and Taiwan have over the chipmaking industry.
The Anil Agarwal Chipmaking Plan
In September 2022, Mr Agarwal announced that his group Volcan Investments Ltd had joined forces with Hon Hai Precision Industry Co. – the assembler of most of the world’s iPhones – and Agarwal’s mining group Vedanta Resources Ltd. to build a chipmaking facility in the state of Gujarat.
But in December, news began to break over the struggles Mr Agarwal was facing in his efforts to open a $19 billion semiconductor factory in India in just two years
Mr Agarwal’s representatives met with potential investors from the Middle East, Singapore, and the US to garner financing commitments for the manufacturing business. But alas, this ended up with almost no actual backers for the project.
Sources reported that investors to whom Mr Agarwal pitched the plan raised concerns about the group’s limited experience in the sector and its stretched financial situation. In fact, the initial effort launched last year only attracted three applicants.
A spokesperson for Mr Agarwal’s chip plan partnership later hit back at rumours that Mr Agarwal was struggling to get investors saying instead that his group was not looking for any external investors to finance the semiconductor and display project.
The initial partnership has reportedly put down a beginner investment of $2 billion for the chipmaking plant and Prime Minister Narendra Modi’s government has also offered to pay half the costs for the project under the country’s production incentive plan.
But despite initial investment and funding from the Indian government, Mr Agarwal’s struggles to get the investment he needs have continued into 2023.
So, What Went Wrong?
Unfortunately, for tycoon Anil Agarwal, his project is floundering. But why is this plan taking so long to get off the ground?
The investor applicants that offered to fund the project last year have made little progress so far. As mentioned, reports have stated that investors were deterred from committing to the project due to worries over Agarwal’s partnerships collective inexperience in the chipmaking sector and the financial strain of the plan.
To kick-start a domestic chip industry, Mr Modi’s government originally gave companies just 45 days to apply for financial support. Whilst the state pledged to fund as much as half the cost of building any chip fabrication plant, the short window hindered funding as it led to just a few applicants applying.
Whilst the government has now realised its mistake and reopened the application process, this initial error helped to damage the funding process. However, as the government’s production incentive plan is open to multiple applicants, Mr Agarwal’s plan will need to compete to win federal support for its chip plant. For example, India’s salt-to-software Tata conglomerate has publicly voiced its ambitions to get into chipmaking.
All-in-all, the plan is simply too financially stretched, especially since Mr Agarwal’s Vedanta is already reeling under a heavy debt burden. This means the tycoon’s dream to build a chip plant hinges on government aid for which there is heated competition. Furthermore, no companies that make up the partnership – including Vedanta or Hon Hai – have significant experience in manufacturing chips.
But this hasn’t stopped Mr Agarwal or the Indian government from supporting the idea of the chipmaking plant as it comes at a time when the country is desperately trying to promote its semiconductor scene.
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The Impact On India And Wider Political Scene
Bloomberg has now reported that the Indian government, one of the initial investors in the project, has announced they will reopen the $10 billion incentive program to lure chipmakers into the country.
By reopening the application process and doing away with the previous 45-day requirement for submission, there is hope that the previous poor round of investment will be quietly swept under the carpet and a fresh new round brought in.
Above all, India understands the importance of keeping chipmaking projects such as Mr Agarwal’s afloat.
By reopening the application process, New Delhi hopes to encourage local chipmaking to help the country’s attempts to join countries including the US in trying to boost chip output to reduce reliance on expensive imports and dependence on Taiwan and China.
So far, no South Asian nations have been successful in supplying a large enough global chip player that can challenge the major supply chain of Taiwan and China – something that is becoming increasingly worrying due to the heated political situation.
In a recent statement, David Reed, chief executive officer of Vedanta’s semiconductor business, has assured the public that the project is now “on track” for the venture to break ground in the fourth quarter of this year and earn revenue in the first half of 2027.
He said partner Hon Hai, also known as Foxconn, has also secured “production-grade, high volume 40-nanometer technology” for the venture as well as “development grade 28-nanometer technology,” though he did not disclose where the tech is coming from.
“Foxconn and Vedanta are following the application process issued by the Indian government with confidence and partnership,” Reed said. “We have supplied all relevant information and eagerly wait for the final approval.”
So, after recent news of the government reopening the $10 billion incentive program, it seems Mr Agarwal’s partnership for an Indian chipmaking plant is looking up after months of struggling to get off the ground. This may be one of the first steps forward in quelling China and Tawian’s monopoly on the industry.
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