India took the first step towards self-reliance in electronics manufacturing with a venture capital firm all set to invest ₹700 crore in a chip-making facility.

Mumbai-based Next Orbit Ventures — formed to invest in semiconductor projects — will soon invest in one of the two consortiums interested in setting up massive chip-manufacturing facilities in the country.

“We would be investing ₹700 crore in one of the two fabrication units immediately. Once the fabs receive a letter of commitment from the government, we’ll invest more,” Ajay Jalan, Managing Partner at Next Orbit Ventures, told BusinessLine . Fabs are facilities where semiconductor devices are manufactured.

“We intend to invest in the first digital fab in Gujarat for a total project cost of $5.6 billion and the first analog fab for a total project cost of $1 billion,” Jalan said. The cost of developing analog semiconductors is lower than that for digital semiconductors. The formal contract signing is expected to take place before the month-end.

The investment would be a part of the $750 million electronics fund that Next Orbit Ventures launched recently. Jalan said the firm will invest up to $400 million from the fund in the fabs, while the rest will be invested in electronics component manufacturing companies and electronic design firms.

India relies heavily on electronics imports: in 2014-15, total import of electronics goods grew over 15 per cent to reach an estimated ₹2,25,600 crore over the previous fiscal. The consortia approved by the government to build the two semiconductor units include one led by Jaiprakash Associates, which partnered IBM and Tower Semiconductor of Israel; and another led by HSMC Technologies, which joined hands with ST Microelectronics and Silterra Malaysia. The overall investment required for the two fabs is expected to cross ₹70,000 crore.

The groundbreaking for the two chip-manufacturing units has been delayed for the last four years for reasons ranging from government approvals to feasibility issues. However, with the first large investment coming in, the industry expects more investors to follow.

The two proposed fabs were the biggest components of the Electronic and Semiconductor Policy rolled out in 2012.

“In order to invest more, we expect the government to also infuse some funds into the project. The project is of national importance and it is surprising that the ₹10,000-crore Electronic Development Fund launched by the government recently has no plans to invest in the fabs, which are the biggest building blocks for the electronics manufacturing ecosystem,” Jalan said.

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