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hcl group: HCL Group planning $300 million semicon foray: sources

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The Shiv Nadar-founded HCL Group, which began decades ago as a maker of computer hardware and peripherals before establishing its software credentials globally, plans an ambitious foray into India’s fast-evolving semiconductor ecosystem, several officials and industry executives aware of the development told ET.

The HCL Group is close to submitting a proposal to the Centre to set up an assembly, testing, marking, and packaging (ATMP) unit for semiconductors, they added. The project may cost in the range of $200-$300 million.

Also read | Chipping in: When, where and how

HCL will be joining ranks with companies such as Micron that have recently announced a $825-million investment in the country for an Outsourced Semiconductor Assembly and Test (OSAT) plant at Sanand in Gujarat. The cumulative investment in the project is $2.75 billion.

“HCL Group receives and evaluates investment opportunities from time to time. We report these at the appropriate time based on meaningful progress,” an HCL Group spokesperson told ET.

Now, forging a chip partnership is key for the HCL Group to enter the semiconductor value chain.

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“They (HCL) plan to submit a proposal… But they will need to strike a partnership with a firm whose chips will be packaged at their unit,” a senior government official said, adding that the company would have to submit a business model to the government to receive incentives under the India Semiconductor Mission.

Another official confirmed that talks are ongoing between the company and the government over the proposal.

ATMP/OSAT units are an important link in the semiconductor manufacturing chain as they perform the crucial tasks of testing and packing silicon chips.

Also read | Foxconn, Vedanta pull the plug on semiconductor JV

Group-Level Initiative

Officials added that, however, this foray is being driven by the HCL Group and not directly by HCLTech, which is the $12.6-billion IT exports arm of the group.

India’s semiconductor initiative has lately grabbed headline space after Foxconn decided to call off its proposed joint venture with the Vedanta Group. The company would have marked India’s entry into global chip-making, potentially reducing the reliance on Northeast Asia that enjoys a virtual monopoly in semiconductor manufacturing value grid.

Also read | Foxconn pings other large business houses as Vedanta chip JV stalls

HCL will be applying for sops under the $10-billion semiconductor incentive programme.

In this program, the central and state subsidies can go up to as much as 75% of the capital expenditure incurred by companies that set up chip manufacturing units in the country.

One of the officials said that it may be strategic for HCL to enter the semiconductor manufacturing ecosystem in the country as they already service chip makers like Intel at a global level as a software services firm.

ET had reported in November that HCL is looking at purchasing a stake in one of the semiconductor wafer fab applicants ISMC Analog.

ISMC Analog, a consortium of Mumbai-based Next Orbit Ventures and Israeli tech company Tower, was one among three applicants vying for subsidies under the centre’s Rs 76,000-crore Semicon India programme. It has chosen an electronics cluster near Mysuru in Karnataka, to build its $3-billion fab.

Last year, Intel announced a $5.4 billion takeover of chip manufacturing firm Tower. However, the delay in regulatory clearances for the acquisition has led to stalling of the ISMC application too.

“Since nothing is moving on the Intel-Tower front, HCL is planning to go solo and apply for an ATMP unit,” said one of the officials.

Manufacturing Legacy

Over the years, the Noida-based company had partnerships with many iconic brands such as Apple, Nokia and Microsoft, among others, and was credited with bringing them to the country. It ceded ground in computer electronics manufacturing to Chinese companies, which started to make products at lower costs and on a much larger scale. The group gradually wound down its hardware arm to focus on the software services operations that have grown over the years, and HCLTech is now the third largest software firm in the country.

Apart from software, the company also has an established presence in the semiconductor space where it claims to provide lithography, etching, Ion implant, assembly, and packaging as well as testing facilities for companies from across the world.

The government’s ambitious semiconductor plan has got significant impetus in the last few weeks. While Micron became the first of the large global players to have a concrete plan to set up a semiconductor testing facility in India, Applied Materials, the world’s leading maker of precision equipment, announced its plan to invest more than $400 million to set up a collaborative engineering centre in Bengaluru.

Lam Research, a global leader in innovative wafer fabrication equipment and services to the semiconductor industry, aims to train 60,000 semiconductor engineers over the next 10 years. And the government is also in talks with US-based Synopsys, which may also invest in India. Synopsys is the maker of precision tools used in the manufacturing and fabrication of semiconductor chips.

Incentives for all these proposals will fall under the India Semiconductor Mission.

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