The 123-year-old Murugappa Group is looking to venture into the semiconductor segment with a proposed $790 million plant.
This will be an interesting, high-tech addition to the $9 billion (revenue) engineering and financial services conglomerate, which is based in Chennai and operates in 29 industries ranging from auto components to finance to sugar.
The expansion will be through group company CG Power and Industrial Solutions, which is based in Mumbai. It filed an application earlier this week with the Indian governmentâs Ministry of Electronics and Information Technology to seek approval to set up a semiconductor plant. It has also requested a government subsidy to offset some of the costs of setting up the plant.
The 86-year-old CG Power is looking to set up an outsourced semiconductor assembly test plant that will provide semiconductor assembly, packaging and testing of circuits.
The $790 million investment will be over five years, and will include subsidies and contributions from joint venture partners. CG Power is simultaneously looking to partner with tech providers or anchor customers to help in getting it off the ground.
CG Powerâwhich came under the Murugappa fold when the groupâs engineering and manufacturing firm Tube Investments of India took a 56% stake in the debt-ridden company for 7 billion rupees ($85 million)âmanufactures industrial machinery and makes everything from motors and drives to transformers and switchgears.
The Murugappa familyâwhose fourth- and fifth-generation members run the groupâappears on the list of Indiaâs richest at No. 25 with a $7.3 billion fortune.
The Murugappa Groupâs proposed venture comes on the heels of last monthâs announcement by Kaynes Technology India that it was looking to set up semiconductor plant in the southern state of Telangana. The cost of the facility is estimated at a 28 billion rupees ($340 million) by Kaynes Technology, which was recently in the news for supplying electronic systems for Indiaâs historic moon mission.
The Murugappa and Kaynes proposals stand to benefit from the Indian governmentâs 760 billion rupees ($9.3 billion) production-linked incentive scheme announced in December 2021 to reduce import dependence and for providing financial support to companies that are looking to engage in the development of semiconductors and display manufacturing segments. This is with the view to make India a global hub for semiconductor manufacturing.
âMore and more groups in India will be showing an interest in getting into semiconductors,â says Sanjay Gupta, charman of the Indian Electronics and Semiconductor Association (IESA), an industry body. âBut what is key is that they should have the right technology partner in the semiconductor domain. The challenge is to have the right technology adoption and skilled workers to take this forward.â
Mining magnate Anil Agarwal had struck a partnership with Taiwanâs Foxconn in February 2022 to get a semiconductor joint venture off the ground. But just 16 months into the joint venture, the deal was called off and Foxconn pulled out of the partnership without citing a specific reason. Vedanta has not announced any new partners yet.
âThere is no dearth of money for projects,â says IESAâs Gupta. âBut what we need is a collaborative mindset.â