As Maharashtra clears Adani-Tower chip plant, center’s approval awaited

Last Updated09/09/2024

The Maharashtra government’s announcement late Thursday that it had approved a $10 billion chip plant to be jointly set up by Israel’s Tower Semiconductor and the Adani Group, caught many in the industry and some in Delhi’s policy circles by surprise.

The Maharashtra government's recent announcement approving a $10 billion semiconductor plant to be jointly set up by Israel's Tower Semiconductor and the Adani Group has surprised many in the industry.
The announcement comes before receiving the necessary clearance from the Ministry of Electronics and IT (MeitY) and its technical committee.
This plant, to be set up in Panvel, Raigad, is expected to generate 15,000 jobs, with an investment of nearly Rs 84,947 crore ($10 billion) across two phases.

The central government’s India Semiconductor Mission offers subsidies that could cover half the capex needed for semiconductor units, making such fiscal support crucial for attracting investment in India’s nascent chip ecosystem.
However, Adani and Tower Semiconductor’s proposal is still under evaluation by the Centre’s technical committee, meaning the plant cannot proceed without its approval.
Senior officials at MeitY expressed surprise at the state's announcement, emphasizing that any project lacking central approval would not qualify for the required subsidies.
Despite the fanfare surrounding the Maharashtra government's announcement, neither the Adani Group nor Tower Semiconductor has made any formal declaration, nor has the central government issued a statement.

Some analysts and officials believe the timing of the announcement may be politically motivated, as Maharashtra's Assembly elections are approaching.
Given that the plant is unlikely to begin operations without central clearance and will take at least seven years to become functional, the announcement could be a strategic move to bolster political sentiment.
The Vedanta-Foxconn chip plant debacle—where a proposed plant was initially planned in Maharashtra but moved to Gujarat—serves as a reminder of the political sensitivity surrounding such projects.

Industry insiders have pointed out that Tower Semiconductor has the necessary technology to make legacy node chips, differentiating it from other recent proposals like the Vedanta-Foxconn plant.
However, the semiconductor ecosystem in India is still developing, and the central government's approval remains the key to moving forward with such large-scale projects. With the Rs 76,000 crore semiconductor mission already stretched, the question remains whether the central subsidies can be allocated for this project.
The proposed plant will focus on analog and mixed signal semiconductors, with a projected capacity of 40,000 wafers per month in the first phase and 80,000 in the second phase, according to Maharashtra Deputy CM Devendra Fadnavis.
While the plant promises long-term employment and investment, its realization hinges on central approval and fiscal support.