Reliance Industries, India’s largest conglomerate, is exploring a possible entry into the semiconductor manufacturing sector, according to a report by Mint. The company, which has interests in telecom, energy, retail and digital services, is in talks with potential foreign partners who can provide the technology and expertise for setting up a chip fabrication plant in India.
Why Reliance wants to make chips
One of the main reasons behind Reliance’s interest in chipmaking is to secure its supply chain and reduce its dependence on imports. The company’s telecom arm, Jio, which has over 400 million subscribers, uses chips for its network equipment and smartphones. Reliance also sells smart TVs, laptops and other electronic devices under its Jio brand.
However, the global chip industry is facing a severe shortage due to the surge in demand from various sectors such as automotive, consumer electronics and cloud computing. The COVID-19 pandemic has also disrupted the production and distribution of chips. This has led to delays and higher costs for chip buyers.
In 2021, Reliance had to postpone the launch of its low-cost smartphone, JioPhone Next, which it developed in partnership with Google, due to the chip shortage. The phone, which was supposed to be launched on September 10, 2021, is now expected to be available by Diwali.
By making its own chips, Reliance can avoid such disruptions and also cater to the growing demand for semiconductors in India. The Indian government has estimated that the domestic chip market will be worth $80 billion by 2028, compared with $23 billion currently.
How Reliance plans to make chips
Reliance is not planning to make chips on its own, but rather partner with foreign chipmakers who have the technology and experience in the field. The company has held preliminary discussions with some potential partners, but has not yet decided on whether to invest or not, according to Mint.
The report did not name the foreign chipmakers that Reliance is talking to, but said that they are likely to be from Taiwan or South Korea, which are the global leaders in chip manufacturing. Taiwan’s TSMC and South Korea’s Samsung are the two largest chipmakers in the world, followed by Intel and GlobalFoundries.
Reliance is also looking for government support and incentives for its chipmaking venture, as the sector requires huge capital expenditure and long-term commitment. The Indian government has been encouraging domestic companies to enter the chip industry as part of its self-reliance and digital transformation initiatives.
The government has announced several schemes and policies to attract investments in chip design and manufacturing, such as offering subsidies, tax breaks, infrastructure support and market access. However, India does not have any operational chip fabrication plants as of now, although some companies such as Vedanta and Foxconn have expressed interest in setting up facilities in the country.
What are the challenges for Reliance
Reliance may have deep pockets and a strong presence in various sectors, but entering the chip industry is not an easy task. The sector is highly competitive and complex, requiring advanced technology, skilled manpower and constant innovation.
The chip industry is also prone to cyclical fluctuations in demand and supply, which can affect the profitability and viability of the business. Moreover, Reliance will have to compete with established players who have decades of experience and expertise in the field.
Arun Mampazhy, a former India executive at GlobalFoundries, told Reuters that Reliance would need a technology partner who can provide the know-how and support for making chips. He said that finding such a partner would be the “make or break point” for Reliance’s chipmaking foray.