Karnataka’s Semiconductor Industry Faces Difficulties Despite Intel-Tower Separation and Other Challenges

The cancellation of Intel’s $5.4 billion deal to buy Israeli chipmaker Tower Semiconductor raised questions about the future of Karnataka semiconductors, as the latter was supposed to play a key role in the manufacturing plant. But the fact is that the future of the state chip went into uncertainty even after the rejection of the proposal.

Last year, it was reported that the International Semiconductor Consortium (ISMC), a joint venture between Abu Dhabi’s Next Orbit Ventures and Tower Semiconductor, wanted to set up a semiconductor plant in Karnataka. The official announcement highlighted that the JV was looking forward to investing $3 billion (Rs 22,900 crore) in the 65nm semiconductor manufacturing facility.

However, in July, when a top central government official was asked about the status of the semiconductor project, the official confirmed that it was rejected without mentioning the reason. So, what became clear is before the split between Intel and Tower happened, the backlash bell had already rung in Karnataka.

Now, the southern state’s semiconductor ecosystem has had a few challenges highlighted by industry experts. They believe that in a state like Karnataka, where water crisis is a serious concern, the operation of a semiconductor plant should take into account the water requirements and adopt suitable strategies to reduce the impact on water resources.

Key factors affecting the process in the region are water procurement, water recycling and treatment, infrastructure, regulatory environment, supply chain and logistics, and environmental sustainability. According to experts, careful planning, strategic alliances and coordination with relevant parties are necessary to address these important issues.

Collaboration with local associations, governance organizations and business groups can help in establishing a prosperous semiconductor unit in Karnataka. Moreover, it is believed that addressing other issues such as power supply, competition and market dynamics can certainly help overcome the challenges associated with the region.

It should also be emphasized that India is not the only country trying to develop a semiconductor ecosystem. Some believe that since other countries like China and Taiwan have already established strong semiconductor industries, Karnataka will have to compete with these countries to attract investment and talent.

To prepare Karnataka for a strong semiconductor ecosystem, experts believe that the government and the private sector must jointly invest in education to create a skilled workforce in the state for the semiconductor industry.

Additionally, the state may consider entering into partnerships with other countries to share knowledge and resources, which may help Karnataka develop its own semiconductor industry faster. It would also be a good idea for the government to review its policies to ensure that they support the semiconductor industry for which Gujarat is highly praised.

However, in the larger picture, the experts also emphasized that establishing fabs is a different ball game, as they are difficult to set up and expensive to maintain. So any state or India currently needs Assembly, Testing, Marking and Packaging (ATMP) facilities. They believe that the country can have the most advanced ATMPs like Gujarat before you get into the great game.