India’s HCL Group and Taiwan’s Foxconn Group’s proposal to jointly build a chip assembly unit in the country is not very satisfactory, according to the government, which has asked both companies to submit more details about the project, said people in know of the developments.
The application is currently being considered for incentives under the USD 10 billion Indian Semiconductor Mission, the people told ET.
The additional details being sought include information on the technology on which the outsourced assembly and testing (OSAT) unit will function, the technology partner for the venture and the type of technology transfer agreement between the partners, said the people cited above.
“The two companies (HCL and Foxconn) will need to get a technology partner. We have also sought details about the uptake of the output from the OSAT unit they have proposed,” said a senior official from the ministry of electronics and information technology.
This January, HCL and Foxconn announced forming a JV to set up an OSAT unit in the country. At the time, people in the know told ET that the total investment in the unit could be between USD 100 million and USD 150 million.
Foxconn’s share in the joint venture will be USD 37.2 million for 40% stake through Foxconn Hon Hai Technology India Mega Development, a subsidiary of Hon Hai Technologies (Foxconn), the company informed stock exchanges at the time.
HCL-Foxconn’s delay in securing approvals comes even as Prime Minister Narendra Modi last week laid the foundation stone for three semiconductor factories, one commercial chip fabrication unit and two assembly, testing, marking, and packaging (ATMP).
While the chip fabrication unit is being built at Dholera in Gujarat by the Tata group and Taiwan’s PSMC, the two ATMP units are being built at Sanand in Gujarat and Morigaon in Assam, by the Tata group and CG Power, respectively. The three units were given approval on February 29.
An email sent to Foxconn did not yield any response. A spokesperson from HCL said the company will be able to share details of the project “at an appropriate time”.
The IT ministry’s queries to the HCL-Foxconn proposal marks a repeat of an earlier plan submitted by Foxconn, in which it had proposed to build a chip manufacturing facility with Vedanta.
The earlier joint venture, which was dissolved mutually last year by the two partners, had also got stuck due to lack of clarity over getting a technology partner since neither had experience in chip manufacturing.
“They (the joint venture) will need a strong technical partner. We have approved three so far and all the applications had all the details such as the kind of agreement between partners, and details of the consumption of chips produced at these factories. HCL and Foxconn will also need to tell us these,” said one of the officials cited above.
In total, India has four semiconductor chip manufacturing units under construction. The total capacity of the three OSAT and ATMP units is likely to be 80.5 million chips per month, people said.
In December 2021, India made the first effort towards setting up a semiconductor manufacturing ecosystem in the country, when it approved a Rs 76,000 crore incentive plan for applicants.
Though the plan initially had a layered incentive structure for applicants based on whether they applied for chip manufacturing, OSAT or ATMP unit, it was later revised to give a flat 50% central subsidy to successful applicants based on the fulfilment of objectives.
