Bad news for China? India is to reopen application process for $10bn in incentives to build local chip factories
The government in New Delhi has renewed its attempt to attract manufacturers to relocate their chip production facilities in India.
Bloomberg reported on Wednesday that India is set to revive its effort to lure prospective chipmakers into the country, as previously announced projects are taking too long to get off the ground.
India’s move comes as some tech manufacturers look away from China as their manufacturing hub of choice, and begin to explore other countries including India, South Korea and Vietnam for example.
According to the Bloomberg report, citing people familiar with the matter, New Delhi plans to reopen the application process for $10 billion in incentives and assistance that it had announced in December 2021, which was intended to encourage local chip-making.
The Indian government is reportedly also keeping the process open-ended, doing away with a previous 45-day requirement for submission.
It comes after the initial effort that was launched in 2022 only attracted three applicants – all of which reportedly have made little progress so far.
India now apparently plans to allow companies to apply again and is set to accept applications until its budgeted $10 billion in incentives is exhausted, the Bloomberg report stated.
The previously announced short window for applications had led to just a few applicants for the scheme, including a partnership between Vedanta Resources Ltd and Taiwan’s Foxconn, and a consortium that includes Tower Semiconductor Ltd, Bloomberg said.
Last September, Vedanta and Foxconn (formally called Hon Hai Precision Industry Co), signed a pact with the western Indian state of Gujarat to invest $19.5 billion to set up semiconductor and display production plants.
India had announced the incentives to help make the Asian country become a key player in the global chip supply chain.
And it should be noted that India has already scored some relocation of tech manufacturing capacity away from China.
In September 2022 for example Apple said that Foxxconn had begun manufacturing some of its iPhone 14 handsets in India.
This was followed by a second factory, after Pegatron in November 2022 also began assembling Apple’s latest iPhone 14 model in India.
Apple had already moved its iPhone 13 manufacturing to India earlier in 2022, and is also considering assembling its iPad tablets there as part of its diversification strategy.
Prior to that, Apple had been manufacturing lower-end iPhones in India since 2017, first via Wistron Corp and later by Foxconn – as it worked with the Indian government’s push for local manufacturing.
Market analysts have previously estimated that Apple could turn India into a global iPhone manufacturing hub by 2025.
But Apple’s decision to transition some of its iPhone manufacturing away from China to India has not been without its challenges.
In February Apple revealed that its engineers and designers often spend weeks or months at a time in Indian factories to oversee manufacturing and iron out faults.
All of this comes as tech manufacturers explored alternative production sources away from China – amid Beijing’s ongoing geopolitical tensions with Western nations.
On Wednesday Reuters quoted the CEO of Cisco Systems, Chuck Robbins, as saying that that the networking giant will begin manufacturing from India in a move to diversify its global supply chain.
Cisco did not reveal the investment size, but said it will support the growing demand from customers in India and expand supply chain capabilities. That said Cisco is reportedly setting a target of $1 billion in domestic production and exports over next few years.
The announcement followed a meeting between Robbins and Prime Minister Narendra Modi in New Delhi.