Amid the competition to woo fab investments between India’s local governments, the discussion between the Vedanta-Foxconn JV with the Karnataka government, currently the leading state in attracting semiconductor investments, is hitting a roadblock over incentives.
Sources reported that the Vedanta-Foxconn JV is willing to invest US $20 billion to set up a fab in Karnataka and wants 20% of the investment value back in the form of incentives and concessions, which will accrue to the state in the form of indirect tax revenues over the long term.
It also said that the Karnataka government viewed the incentives the Vedanta-Foxconn JV asked for difficult to accept despite the government’s willingness to help find a suitable location, provide ample water, reliable electricity, and speedy clearances to fast-track the project.
Although Karnataka is just one of the state governments Vedanta and Foxconn are discussing with for the fab project, Karanataka has been seen as a leader in the competition between local governments to attract semiconductor investments since early May, when a joint venture between Next Orbit Venture and Tower Semiconductor announced a US$3 billion investment in setting up a 65nm fab in Mysuru, Karnataka.
They chose Karnataka partly because of water, electricity, access to talent, living conditions for talented engineers, customized incentives, and a decisive and proactive administrative team.
The incentives provided by the Karnataka government for the electronic system design and manufacturing (ESDM) industry include a capital subsidy of 25% on land and 20% on plant and machinery, 1% of production-linked incentive, and cheap electricity for those who invest in electronic manufacturing clusters (EMCs).
Reportedly, Karanataka helped ISMC find land and set up an EMC in Kochanahalli Industrial Area in Mysuru. Kochanahalli is five kilometers away from Mysuru airport, and a 10-lane expressway will connect the EMC and Bengaluru.
In addition, Karnataka has more than 300 export-oriented manufacturers and is India’s largest chip design hub, consisting of 85 fabless chip design houses and design centers set up by global chip designers.
According to Business Standard, Karanataka chief minister Basavaraj Bommai said that it is the ecosystem that makes Karanataka all the difference in attracting large semiconductor investments, but he is still aware that the state is facing competition from states such as Andhra Pradesh and Tamil Nadu.
