Adani Puts $10 Billion India Chip Plant Plan on Hold

The Adani Group has hit pause on its discussions with Israel’s Tower Semiconductor for a $10 billion chip manufacturing plant in India, sources close to the matter told Reuters. The decision, driven by strategic and business considerations, follows internal assessments suggesting the project might not deliver the expected returns given India’s current semiconductor market landscape.

Maharashtra state in western India had approved the proposal last September, which aimed to produce 80,000 wafers per month and create 5,000 jobs — a key move to support Prime Minister Narendra Modi’s vision of turning India into a semiconductor manufacturing hub.

Sources revealed that Adani pulled back due to concerns over uncertain demand within India and dissatisfaction with Tower Semiconductor’s proposed financial commitment. While Tower was set to contribute technological expertise, Adani reportedly wanted the Israeli chipmaker to have “more skin in the game” financially.

The move marks another potential setback for Modi’s “Make in India” semiconductor ambitions. India still lacks an operational chip fabrication plant, and a previous $19.5 billion joint venture between Vedanta and Foxconn collapsed in mid-2023 due to concerns over project costs and delayed incentive approvals.

Currently, the most prominent semiconductor projects in India include Tata Group’s $11 billion chip fabrication and testing plant, and a $2.7 billion chip packaging facility by U.S.-based Micron.

Industry analysts point out that India’s chip sector remains nascent. According to an April estimate by UBS, the U.S. and China together account for 54% of global semiconductor end-demand, while India’s share is projected at just 6.5% this year.

For now, Adani’s decision highlights ongoing challenges in building a domestic semiconductor supply chain capable of competing with global manufacturing giants like China and Taiwan. While the project could be revisited in the future, it underscores the long road ahead for India’s semiconductor ambitions.