Vedanta-Foxconn to set up India’s 1st chip manufacturing facility in Dholera: Key things to know

Anil Agarwal-led Vedanta Group and Foxconn, the Taiwan-based electronics manufacturing giant, have selected Dholera Special Investment Region (SIR) in Gujarat for setting up India’s first semiconductor manufacturing facility. The development comes months after both companies, through a joint venture, proposed to set up a chip manufacturing facility in the state with an investment of ₹1.54 lakh crore. In September last year, Vedanta and Foxconn had signed a memorandum of understanding (MoU) with the government of Gujarat to set up the plant in the state, which is likely to generate around one lakh direct jobs.

Agarwal had last year said that the facility will help make India's Atmanirbhar Silicon Valley a reality and will officially kickstart India's journey from "being a Chip Taker to a Chip Maker.”

What is the significance of Dholera semiconductor facility?

The Dholera semiconductor facility will generate around one lakh direct jobs and will reduce electronics imports from the country, according to Agarwal. Moreover, with an aim to become the leader of an electronics system design and manufacturing (ESDM), the government of Gujarat has also introduced the Gujarat Semiconductor Policy 2022-27, that aims to provide incentives such as subsidised water and electricity for companies who will invest in semiconductor manufacturing in the state.

Semiconductor is a key component in the manufacturing of electronic devices, mobile phones, and cars and electric vehicles. Currently, Taiwan accounts for more than 90% of the semiconductor manufacturing in the world, followed by the Netherlands, and South Korea. However, over the past few years, the political turmoil in Taiwan has led to a semiconductor crisis globally.

From electronics to car manufacturers, companies across the globe have faced chip crisis. In India, Maruti Suzuki’s pending car order soared to 4.05 lakh units in January this year owing to chip shortages and electronic components. The country’s leading car manufacturer had earlier said that the improvement in semiconductor supply would help in reducing the number of pending orders.

Owing to the chip crisis, the government announced several schemes such as the production-linked incentive (PLI) scheme, new New Electronics Policy, 2019, Electronics Manufacturing Clusters, and the Scheme for Promotion of manufacturing of Electronic Components and Semiconductors (SPECS) to boost domestic design, manufacturing, and assembly. The Centre also launched the Semicon India Programme, with a total outlay of ₹76,000 crores to develop the semiconductor and display manufacturing ecosystem and to provides financial support to companies investing in semiconductors, display manufacturing and the design ecosystems. The setting of the Vedanta-Foxconn semiconductor facility in Gujarat is in line with these initiatives to boost chip production in the country.

In the union budget 2023-24, the government has allocated ₹16,539 crore to the Ministry of Electronics and Information Technology. Of this, ₹3,000 crores has been allocated for the Semiconductor Mission in India which will help in the development of the semiconductor and display manufacturing facility in the country.

In January this year, the export of electronics surged 50% to $2.11 billion as against $1.36 billion last year. From April to January 2022-23 electronic goods exports were recorded at $18.78 Billion as compared to $12.36 Billion during the same period last year registering a growth of over 50%, the ministry of commerce said in a statement last week.

As per joint research by the India Electronics & Semiconductor Association (IESA) and Counterpoint Research, India’s semiconductor component market is expected to rise manifold to touch a total revenue worth $300 billion during 2021-2026. The share of local sourcing is expected to grow to over 17% by 2026, which translates into a six-fold rise in locally-sourced semiconductor revenues.