By Munsif Vengattil and Aditya Kalra
BENGALURU/NEW DELHI (Vmeetsolutions News) – The conglomerate led by Indian tycoon Gautam Adani has halted talks with Israel’s Tower Semiconductor regarding a potential $10 billion semiconductor initiative. According to two sources privy to the situation, this pause was due to the deal lacking strategic and commercial viability for the Adani Group.
In September, the Indian state of Maharashtra approved plans allowing Adani and Tower to establish a facility capable of producing 80,000 wafers monthly, with an aim to generate 5,000 employment opportunities. This initiative supports Prime Minister Narendra Modi’s vision of positioning India as a major center for semiconductor manufacturing.
The Adani Group had earlier mentioned that they were assessing the project. However, discussions with Tower have been suspended as the company’s internal review revealed uncertainties regarding the level of demand—particularly within India—that the venture could potentially attract, according to the initial source familiar with the situation.
“A strategic choice was made here. Adani assessed the situation and opted to hold off for now,” explained the source, who also mentioned that future discussions may be reconsidered down the line.
A secondary source familiar with the situation mentioned that the Adani Group was unhappy with the level of financial commitment Tower was ready to provide for the collaboration, although they did not share specific figures.
The tower was supposed to contribute technological expertise in the agreement; however, as the source noted, “Adani desired for Tower to have greater financial involvement.”
Adani and Tower did not reply to inquiries from Vmeetsolutions News. The sources chose to remain anonymous since the decision hasn’t been disclosed publicly.
The Israeli company specializing in contracts produces analog and mixed-signal semiconductor components, which are primarily utilized in vehicles.
A potential shift in strategy by Adani, whose extensive enterprise boasts a substantial international footprint, might pose yet another challenge to Prime Minister Modi’s “Make in India” initiative aimed at boosting the semiconductor sector.
Modi has prioritized chip manufacturing as a key component of India’s economic plan with the aim of enhancing the country’s geopolitical influence in the realm of electronic production.
Nevertheless, India still lacks a functional chip manufacturing plant. The planned $19.5 billion partnership between Indian group Vedanta and Taiwanese company Foxconn disintegrated in July 2023 due to worries expressed by New Delhi regarding the high project expenses and delays in receiving incentives approval.
The highest profile initiatives presently being developed encompass an $11 billion semiconductor fabrication facility along with a separate chip testing plant by the Tata Group, as well as a $2.7 billion chip packaging operation established by the U.S.-based company Micron.
Adani’s evaluation of the market forecast indicated that the process of producing chips, followed by their packaging for final usage and subsequently selling them to prospective buyers, might not create substantial local demand. This situation contrasts with what occurs in larger production centers such as China, according to the initial informant.
The team believed that the initiative necessitated additional assessment regarding how India ensures that the produced chips are marketed within the country, as mentioned by the source. They also noted that “the market remains in its early stages.”
This month, UBS estimated that the United States and China are leading the market for semiconductor end-demand globally, collectively holding a 54% share. In comparison, India’s portion of this market is projected to reach 6.5% this year.
(Munsif Vengattil and Aditya Kalra reported from New Delhi; Edited by Kim Coghill)