Foxconn-HCL looking to set up chipmaking facility in Tamil Nadu, Telangana

Earlier this week, the HCL Group and Taiwan’s Hon Hai Precision Industry, another name for Foxconn jointly announced plans to establish an OSAT or an Outsourced Semiconductor Assembly and Test unit.

The semiconductor testing facility, expected to require an initial investment of up to $150 million, excluding government incentives, will provide third-party chip packaging and testing services to semiconductor fabrication units.

The HCL-Foxconn joint venture is currently engaged in advanced-level discussions with the states of Tamil Nadu and Telangana regarding the establishment of their recently announced semiconductor assembly and testing unit, according to sources familiar with the matter.

While Karnataka was also considered, insiders suggest that the joint venture is leaning towards Tamil Nadu or Telangana due to more attractive incentive structures offered by these states, as per a report by The Economic Times, as per a report by the Economic Times

Industry executives speculate that Tamil Nadu may have an advantage in securing the project, citing Foxconn’s significant presence in the state. Foxconn currently manufactures iPhones for Apple at its Sriperumbudur facility 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,” the report quoted an industry executive on the potential benefits of choosing Tamil Nadu as saying.

Foxconn disclosed that it would hold a 40 per cent stake in the joint venture, with an investment of $37.2 million. The Taiwanese company’s participation will be through Foxconn Hon Hai Technology India Mega Development, a subsidiary.

Tamil Nadu, during recent global investors meet, unveiled a Semiconductor and Advanced Electronics Policy that offers up to 50 per cent additional financial incentives to semiconductor projects selected under the Centre’s $10 billion chip subsidy plan. This move is expected to significantly subsidize investments, with government officials highlighting that virtually 75 per cent of the entire investment would be subsidized by the state.

(With inputs from agencies)