Tamil Nadu and Telangana on Foxconn-HCL’s radar for new chip facility

The HCL-Foxconn joint venture is in “advanced-level talks” with Tamil Nadu and Telangana to set up its recently announced semiconductor assembly and testing unit, people in the know of the development told ET.Though Karnataka was also in the running, these people said the JV is likely to prefer Tamil Nadu or Telangana for setting up the unit, “attracted by better incentive structures” offered by them.

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“These talks are at an advanced level. Telangana also has a serious proposal and their incentive structure is also attractive. A lot depends on where the unit is finally set up, including the cost of land, the power supply stability and environmental clearances,” a senior central government official said.

Some industry executives, however, said Tamil Nadu could end up bagging the project as Foxconn has “ample presence” in the state. Foxconn makes iPhones for Apple at its facility in Sriperumbudur near Chennai.

“Setting up an OSAT (outsourced semiconductor assembly and testing) near their existing facility (in Tamil Nadu) makes a lot of logistical sense because they can be the technical partners and part consumers of the output from the OSAT facility,” an industry executive, who did not wish to be named, said.

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On Wednesday, the HCL Group and Taiwan’s Hon Hai Precision Industry (Foxconn) said in separate statements that they would work together to set up an OSAT unit. Sources had then told ET that the semiconductor testing facility could be set up with an initial investment of up to $150 million, excluding incentives from central and state governments.

An OSAT unit provides third-party chip packaging and testing to semiconductor fabrication units. Both fabless and fab companies outsource these services to save costs.

Foxconn told the Taiwanese and London stock exchanges that its share in the joint venture would be 40% with an investment of $37.2 million. Foxconn will be present in the JV through Foxconn Hon Hai Technology India Mega Development, a subsidiary.Queries sent to Foxconn remained unanswered as of press time Thursday. HCL declined to comment beyond the statement that came out announcing the partnership.

During the global investors meet held earlier this month, Tamil Nadu announced a Semiconductor and Advanced Electronics Policy which offers up to 50% additional financial incentives to semiconductor projects selected under the Centre’s $10 billion chip subsidy plan.

“(This) basically means that virtually 75% of the entire investment is something that the government is subsidising and on a pari-passu basis,” Ministry of Electronics and Information Technology secretary S Krishnan had said at a panel discussion during the state’s investor meet.