Recently modified Indian Government’s SemiConductor PLI (Production Linked Incentive) program got opened for fresh applications from various High-Tech. manufacturers, post that we saw recent turmoil in old alignments set up for earlier version of PLI, particularly Foxconn pulling out from its 2022 JV (Joint Venture) with Vedanta.
Though by analyzing press statements of both the parties, Foxconn and Vedanta, announcing their decision to end their JV on 10th July 2023, it appears that it’s not a hostile kind of partnership breakup, but it certainly going to increase the competition for higher share in $10B PLI scheme of Govt. of India announced in 2021. Amid this flux, Tech. Analyst 5 Jewels Research (5JR) believes that Govt. of India’s SemiCon PLI should target creating Mega Indian Chip Brands.
Giving his fresh perspective on recent disruption of strategic alignment between Foxconn and Vedanta and both parties likely applying afresh for Semicon PLI independently, Chief Analyst of 5 Jewels Research Mr Sumant Parimal said “Though Foxconn pulling out from JV with Vedanta for jointly manufacturing Semiconductor in India under the Govt. of India’s PLI scheme doesn’t appears as a hostile exit, but breaking of such a strategic JV within one year of MoU executed by Vedanta Foxconn JV with Govt. of Gujarat doesn’t support a required partnership stability and corporate strategy synergies which are typically required for making such large Govt. efforts a time bound success, because concerned Govts. here are totally relying on private and overseas players for executing their strategic Semicon mission”.
“With present flux of re-alignments of High-Tech. manufacturers for claiming benefits under Govt. of India’s PLI scheme, it’s also a time for re-alignment with the fact that end result of Govt. PLI schemes should not be only limited to some manufacturing capacity addition in semiconductor space, but Govt. semiconductor manufacturing incentives should be also aligned with aspiration of creating mega Indian Chip Brands. This essentially means that players who are going to drive benefits under Govt. PLI schemes should not only contribute towards enhancing Indian GDP, but should also contributes towards enhancing India’s MarketCap directly or indirectly. If we analyze domestic MarketCap enhancement potentials of $10 B semiconductor PLI incentive scheme announced by Govt. of India, as per our assessment by utilizing this incentive amount, country’s Marketcap can be enhanced by $350 Billion over the years, which is around 10% of present consolidated market capitalization of listed Indian brands. Thus, apart from production capacity push in semiconductor area, India also needs to push domestic brand value creation from the public investment which Govt. is doing in form of incentives offered to semiconductor manufacturers” 5JR Chief Analyst Sumant Parimal adds further.
“Further, more specialized, and innovative chips like A.I. (Artificial Intelligence) Chips, Analytics Chips, Gaming Chips (like GPUs), Edge Computing Chips, Quantum Chips, are going to create tremendous market value compared to much matured chips with same investment amount. Thus Govt. PLI schemes should also focus on encouraging this kind of specialized and innovative chips manufacturing, giving maximum economic benefits to the country over every dollar of public money spent under PLI scheme”. Mr Sumant Parimal says further.
Recently we have seen how A.I. Chip manufacturer NVIDIA crossed $1T in Market capitalization post boom in its GPU chip demand subsequent to launch of Generative A.I. tools like ChatGPT. At present NVIDIA tops the list of chip companies on market cap value, and much older chip maker like Intel stands far behind NVIDIA in market capitalization.
