Home / Companies / News /  Vedanta makes a resounding $15-bn chip bet

Billionaire Anil Agarwal’s Vedanta group is planning to invest $15 billion over the next 5-10 years to make displays and semiconductor chips in India. The investment will be made through group company Avanstrate Inc., a Tokyo-based maker of the special glass used in LCD panels.

The investment will be made in a phased manner and will comprise an integrated display fabrication facility and a separate semiconductor plant, Akarsh Hebbar, managing director of Avanstrate Inc., said in an interview. Integrated fabs cover almost the entire manufacturing process of a chip and include two or three factories that take a “sand-to-brand" approach towards making semiconductors.

The proposal comes after the government on 16 December unveiled a $10 billion incentive scheme to encourage companies to build semiconductor and display fabs. While the framework of the scheme is still being worked out, the government plans to provide financial support of up to 50% of the project cost to eligible companies.

Vedanta to invest $15 bn in fab plants
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Vedanta to invest $15 bn in fab plants

Avanstrate will start with assembly, test, marking and packaging (ATMP) and outsourced semiconductor testing (OSAT) units and subsequently build full-fledged fabs. In the first phase, the firm will invest $5-10 billion, leveraging the government’s production-linked incentive (PLI) scheme for semiconductor manufacturing, Hebbar said.

Avanstrate will start with the integrated display fab that will be built in four phases, while the semiconductor plant will be built in two phases. In the first phase, the company will target a capacity of 60,000 panel sheets and 10 million displays. Display panels are cut out of large glass sheets that are called panel sheets.

“Realistically speaking, we should come up with the larger panel fab and the semiconductor fab by 2025-26. The smaller factories, like OSAT, may come by the end of 2024," Hebbar said. “This is phase 1. Phase 2 will likely start about eight to nine years later," he added.

Avanstrate is in talks with various states that have experience in electronics manufacturing, including Gujarat, Tamil Nadu, Maharashtra, and Haryana. These provide incentives over and above the central government’s schemes. Hebbar said proximity to ports and railways would be key considerations for setting up the units. “It’s an initial phase. We want them to come forward with the best proposal," he said. He added that initial conversations were encouraging, and substantial packages are expected.

To be sure, Vedanta isn’t the only company speaking to these states. In November, Reuters reported Tata group was in talks with Tamil Nadu, Karnataka and Telangana to set up an OSAT plant. “At Tata group, we have already pivoted into a number of new businesses like electronics manufacturing, 5G network equipment as well as semiconductors, in all probability," N. Chandrasekaran, chairman of Tata group, said at an industry event in August.

Further, companies in India have unsuccessfully tried to build semiconductor manufacturing bases in the past. The Vedanta Group, for instance, was reportedly formulating a 6,000 crore investment for an LCD manufacturing unit in Noida in 2018. Likewise, the Reliance Group and Videocon were also mulling setting up fab units, according to multiple reports that cited unidentified people.

That said, the current PLI scheme is at least the third time that the country is trying to attract chip firms. The government said last week that investments worth 1.70 trillion are expected for over 20 units, including two chipmakers and two display manufacturers who will set up units over the next four years. “Many companies had a very outside-in look at this entire thing. They were looking at India and skimming the states in terms of whether there’s ready water and electricity. We’re finding a lot of traction in places where they’re talking about high fidelity, subsidized rates for electricity, proximity to ports, and also to water bodies, which will give us 24x7 water structure, in a very clean and economical way," he asserted.

Hebbar said glass and processor fabs would bring 50% of the value chain into India. The company has been in discussion with its partners in Taiwan and Korea. “It is imperative companies that supply us are co-located, which will attract the whole industry ," he added.

About 75% of initial demand is expected to come from here, Hebbar said. Glass, for instance, will be consumed by automotive, television, mobile phones and many other industries, including military. On the other hand, semiconductor chips in 28nm-65nm nodes will be used in low-end smartphones and feature phones, along with appliances, CCTV cameras and more. “We’re targeting the consumer segment, but the applications of these chips could be varied," he said.

Nodes refer to the technology node, also called process node, which is used to manufacture a chip. This size determines the efficiency of a chip and the amount of power it can generate. The most advanced chips used by companies like Apple, Samsung and more in their high-end phones today are built on 5nm nodes by companies like Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung Semiconductors.

“You will see the US putting $50 billion, Europe putting $42 billion, but those are all in the latest 7nm, 9nm chips, which India doesn’t need," Hebbar said.

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