New Delhi Presses Firms in Japan, South Korea to Set Up Semiconductor Firms in India

By Takashi Itoda / Yomiuri Shimbun Correspondent

2:00 JST, November 26, 2023

AHMEDABAD, India — Against a background in which Washington is spurring U.S. companies to invest in India as a countermeasure against China, the Indian government is pressing companies in the United States, South Korea and Japan to establish plants in the country.

However, India faces many challenges before it can become a “semiconductor superpower,” including securing industrial water supplies and developing a logistic network.

Sprawling site

On Nov. 8, a delegation of about 80 people, including senior officials from about 40 Japanese companies, visited the Dholera Special Investment Region (SIR), an industrial park that sits about 100 kilometers from Ahmedabad, the largest city in India’s western state of Gujarat, about 1,000 kilometers from New Delhi.

The Dholera SIR covers about 92,000 hectares. Factories, housing, commercial facilities, an airport and port facilities are planned to be built on the massive site. The project is expected to cost more than ¥1 trillion.

“We’ll spare no effort to support companies that join the project,” said Rajesh Singh, chairman of the National Industrial Corridor Development Corporation (NICDC) of India, which is overseeing the project.

Presently, however, Dholera is only partially developed, including some roads and water purification facilities. Work to construct factories has yet to begin. A vast area of swamp stretches as far as the eye can see.

As part of the project, an expressway connecting Dholera and Ahmedabad is scheduled to open in 2024, but construction has made little progress.

Delegation members asked questions regarding the securing of industrial water, human resources and a stable supply of electricity, all of which are indispensable for semiconductor manufacturing.

In response, an NICDC official answered in a general fashion, repeatedly saying, “No problem,” an approach that confused many of the members.

In contrast to India’s ardent sales pitch, some of the delegation voiced concerns that “It would be difficult to jump-start the nation’s semiconductor industry, noting that it had taken more than two decades for the industry take root in other countries.”

Concerns over lagging

The Indian government is running a “Make in India” campaign to promote the manufacturing industry, giving preferential tax treatment to companies that make goods in the country.

The Indian government is strongly focused on the semiconductor industry — a key factor in the creation of industrial products. The government intends to strengthen its manufacturing sector by fostering this realm.

Meanwhile, the United States is encouraging U.S. companies to expand their operations to India — partly to restrain China, which is boosting its presence in the Indo-Pacific region.

In June, U.S. semiconductor giant Micron Technology, Inc. announced it would build a new flash memory assembly plant in a different industrial park in Gujarat. The company also is weighing expanding its operations into Dholera.

In terms of economic security, it will become increasingly important for Japan to cooperate with India, which keeps a certain distance from China.

In July, the governments of Japan and India signed a memorandum of understanding with the aim of establishing a semiconductor supply network. The first talks on the matter were held online on Nov. 10.

India is also calling on South Korea and other countries to invest in India. Some Japanese government officials have expressed concerns in this regard, saying, “The worst-case scenario would be that the Dholera project site fills up leaving no room for Japanese companies to expand there.”

“We’d like to convey Japanese companies’ concerns to the Indian side and ask it to act so firms can make appropriate decisions,” said Yasuaki Negishi, regional head for Asia and the Pacific region of the Japan Bank for International Cooperation (JBIC), which has invested in the NICDC.