Adani Group Paused $10 Billion Chip Deal Talks with Tower Semiconductor

Adani Group, a ports-to-power conglomerate led by Gautam Adani, has apparently halted talks for a $10 billion semiconductor collaboration with Tower Semiconductor of Israel. The move came after an internal assessment that found the idea currently lacked strategic and commercial feasibility, according to a media report.

Adani Group's intention to establish an INR 83,947 Cr ($10 Bn) semiconductor manufacturing factory with Israel's Tower Semiconductor was authorised by Maharashtra's cabinet in September of last year.

This move supported India's goal of becoming a worldwide centre for chip manufacture and was anticipated to generate 5,000 jobs. In phase 1, the semiconductor plant will be able to produce 40,000 wafers per month; after phase 2, this capacity will rise to 80,000 wafers per month.

Why the Deal was Paused?

The Adani Group had previously said that the project was being considered. But after the most recent evaluation, the business withdrew its statement, citing concerns about demand, particularly in India. The report went on to say that the choice was more strategic in nature.

After evaluating it, Adani made the decision to wait, even if it is possible that this will restart at a later date. Without providing specifics, another story stated that the group was dissatisfied with the amount of money Tower was willing to contribute to the relationship.

 According to the article, Adani wanted Tower to have more financial stake in the contract, even though Tower was supposed to contribute technological expertise.

Chipmaking Sector in India

As of now, India lacks a functional chip manufacturing facility. In July 2023, a $19.5 billion joint venture between Taiwan's Foxconn and Indian company Vedanta collapsed due to delays in incentive clearances and project prices, which New Delhi had questioned.

The most well-known projects now in progress are a $2.7 billion chip packaging unit by U.S.-based Micron and an $11 billion chipmaking and additional chip testing plant by the Tata Group.

According to a UBS estimate this month, the United States and China together account for 54% of the world's semiconductor end demand. This year, India will have a 6.5% share.

Set Back for Modi Government

To increase chipmaking in India, the western state of Maharashtra announced in September of last year that Adani Group and Tower had been approved to establish a plant that would produce 80,000 wafers each month.

Their production partnership was expected to create about 5,000 jobs. The agreement, which signalled the Adani Group's entry into the semiconductor sector, is probably going to be a significant blow to Prime Minister Narendra Modi's "Make in India" initiative.

The India Electronics and Semiconductor Association (IESA) forecasts that the country's semiconductor market will reach $103.4 billion by 2030, up from $52 billion in 2024.

According to the report, demand from key industries such as consumer electronics, automotive, aerospace, military, information technology (IT), telecommunications, and mobile phones is driving the increase.