8th September 2023,Mumbai: Reliance Industries’ semiconductor exploration
Billionaire Mukesh Ambani’s Reliance Industries has set its sights on the semiconductor industry, a strategic move that could alleviate its supply chain challenges and meet the surging demand for chips in India. Sources familiar with the company’s plans reveal that Reliance has engaged in preliminary discussions with foreign chip manufacturers, potentially signaling a significant transformation for the conglomerate.
Government Encouragement
The Indian government’s support has played a pivotal role in inspiring Reliance’s semiconductor aspirations. These discussions are propelled by a vision outlined by Prime Minister Narendra Modi to position India as a global chip manufacturer. While there is intent within Reliance, no concrete timeline has been established, and the company has yet to commit to this substantial endeavor.
Unveiling the Potential Partners
Details regarding the foreign chipmakers involved in these discussions remain undisclosed. The secrecy surrounding this venture suggests its sensitivity, with insiders refraining from public comments. Even Reliance Industries itself has chosen not to respond to repeated inquiries regarding its semiconductor pursuits.
The Indian Semiconductor Landscape
India currently lacks a domestic chip manufacturing infrastructure, but there are promising developments on the horizon. Companies like Vedanta and Taiwan’s Foxconn have expressed interest in establishing chip manufacturing facilities within the country. For Reliance, venturing into semiconductor production could serve as a proactive measure against potential chip shortages that could impact its telecommunications and electronic device businesses. In 2021, the conglomerate postponed the launch of a low-cost smartphone it was developing with Google due to the chip shortage.
Surging Global Demand
The growing global and Indian demand for semiconductors underpins the attractiveness of this industry. The Indian government projects that the domestic chip market will expand to a staggering $80 billion by 2028, a significant leap from the current $23 billion. With a market capitalization of approximately $200 billion, Reliance stands as one of India’s best-positioned companies to delve into semiconductor manufacturing, according to Arun Mampazhy, a former India executive at US-based chipmaker GlobalFoundries. Notably, Reliance has both the financial resources and a proven track record of collaboration with the government, essential elements for success in the semiconductor industry.
Navigating the Complex Semiconductor Industry
The semiconductor industry is renowned for its volatile boom-and-bust cycles, demanding a high level of expertise and resources. For Reliance, securing a technology partner through joint ventures or technology transfers could be the pivotal factor in its semiconductor venture’s success. As Mampazhy highlights, this decision is the “make or break point” for Reliance’s ambitions in the semiconductor realm.
Setbacks and Government Incentives
Despite the Indian government’s offer of $10 billion in incentives to promote chip manufacturing, the nation has faced setbacks in realizing its semiconductor ambitions. The $19.5 billion venture between Vedanta and Foxconn crumbled in July due to difficulties in securing a suitable technology partner. Foxconn later opted to invest in India independently. Similarly, ISMC, a venture between Next Orbit Ventures and Israel’s Tower Semiconductor, has encountered delays after Intel expressed interest in acquiring Tower, leading to the collapse of negotiations.
Reliance’s Potential Stake
In pursuit of its semiconductor goals, Reliance has been considering a substantial investment of $300 million, which would grant the conglomerate a 30 percent stake in the venture. This investment demonstrates Reliance’s commitment to exploring the semiconductor industry and its willingness to play a significant role in India’s semiconductor ecosystem.
Reliance Industries’ foray into semiconductor manufacturing marks a significant development in India’s journey toward becoming a global chip manufacturing powerhouse. With the right technology partner and a strategic approach, Reliance has the potential to make a substantial impact on the semiconductor landscape, contributing to the country’s technological self-sufficiency and economic growth.
-by Kashvi Gala