New ₹3,700-crore HCL-Foxconn JV to help India localise display manufacturing

The ₹3,700-crore ($433 million) project, first floated in January 2024, is an outsourced semiconductor assembly and testing (Osat) facility being developed by IT services firm HCL Group in partnership with Taiwanese contract manufacturer Hon Hai Precision Industry Co. Ltd, better known as Foxconn.

However, the HCL-Foxconn joint venture is the first “advanced manufacturing Osat” in the country, catering specifically to displays, making it the first chip-testing project of its kind. It will help the country localise the manufacturing of displays used in mobile phones and laptops, a senior official with direct knowledge of the matter told Mint on the condition of anonymity.

The facility, likely to become operational by 2027, will target a monthly output of 36 million chips, made from processing 20,000 semiconductor wafers per month. 

The fifth OSAT in the country, which aims for a $500-billion electronics economy in the next five years, comes as the semiconductor industry awaits cabinet approval for the second tranche of ISM incentives worth up to $20 billion. 

Mint reported in September 2024 that incentives could focus more on chip and display fabs than on Osat projects.

ISM second phase

However, the HCL-Foxconn Osat is in line with the overall strategy of the ISM second phase, according to industry stakeholders.

While chip-testing plants are typically of low margin and value, “the ideal strategy to set up Osats in India would either be to partner with a world-class chip and electronics brand that has existing clients and can draw business to the country, or for new forms of technology that will contribute to increasing value addition in new product categories,” Jasbir Singh Gujral, managing director of electronics manufacturing firm Syrma SGS Technology Ltd, told Mint.

This project, for reference, is the first project that will help India localise displays to a greater extent.

This, though, is not the same as a display fabrication plant, which is responsible for the end-to-end manufacturing of the semiconductor components of a display. It is what generates the second-highest percentage of domestic value for products such as smartphones and laptops (apart from the primary processor itself). 

But, according to the stakeholders, it is also highly complex and expensive to establish. “More than that, the HCL-Foxconn project is what will produce high-value display driver integrated circuits (DDICs). These are far more complex devices than the general-purpose ICs that projects such as the Tata Electronics Osat are set to produce, which will deliver higher per-chip dollar value,” said Ashok Chandak, president of India Electronics and Semiconductor Association (Iesa).

“These projects are what will eventually help India realise its electronics goal, since it will, for the first time, add value to the display sector in all of electronics manufacturing in the country. The demand for display ICs is high, and establishing this project will help India eventually attract a full-scale display fab, or other projects in both upstream and downstream divisions of the Indian semiconductor industry,” Chandak added.

Other Osats being built in India are Tata Electronics’ chip-testing plant in Assam, which plans to make 48 million chips per day at a net investment of around $3.2 billion; Kaynes Technology’s Osat in Bengaluru, which will produce 6.3 million chips per day at an investment of $388 million; Murugappa Group’s CG Semi, in joint venture with Japan’s Renesas, targets the production of 15 million chips per day at a net investment of $222 million.

Chandak affirmed that while each of these projects will produce more chips, the HCL-Foxconn project’s assembly of display chips is the cause for the latter’s lower volume, but higher value.

The project is being built near Jewar Airport, close to Noida, Uttar Pradesh.