Modi’s plans to develop a chip have faltered as companies scramble to find technology partners.

NEW DELHI/OAKLAND, Calif., June 1 (Reuters) – India’s bid for $10 billion in semiconductor incentives is a major setback for Prime Minister Narendra Modi’s chip-making ambitions as major companies, including Foxconn’s joint venture, lack technology partners.

A planned $3 billion semiconductor facility in India by chip consortium ISMC, which counts Israeli chipmaker Tower as a technology partner, has been put on hold by Intel’s move, three people with direct knowledge of the plan said.

Talks to rope in European chipmaker STMicroelectronics ( STMPA.PA ) as partners in a second mega $19.5 billion plan to jointly build chips domestically by India’s Vedanta and Taiwan’s Foxconn have been delayed, according to a source with direct knowledge of the fourth. he said.

Modi has made chipmaking a priority in India’s economic strategy as he seeks to “bring in a new era in electronics manufacturing” by wooing global companies.

India, which expects its semiconductor market to reach $63 billion by 2026, last year received three applications to set up plants under the incentive scheme. They are from Vedanta-Foxconn JV. ISMC, an international consortium that counts Tower Semiconductor ( TSEM.TA ) as a technology partner; and Singapore-based IGSS Ventures.

A Vedanta JV plant is set to come up in Modi’s home state of Gujarat, while ISMC and IGSS have each committed $3 billion for plants in two separate southern states.

ISMC’s plans for a $3 billion chip manufacturing facility are currently on hold as Tower is unable to sign binding agreements as things are under review after Intel acquired it for $5.4 billion last year, the three sources said. The deal is pending regulatory approvals.

Speaking of India’s semiconductor ambitions, Indian Deputy IT Minister Rajeev Chandrasekhar told Reuters in a May 19 interview that ISMC “couldn’t continue” because of the Intel acquisition and IGSS wanted to “resubmit (the application)” for incentives. “The two had to break up,” he said without elaborating.

Tower may reevaluate its participation in the award depending on how the deal with Intel Pan plays out, two of the sources said.

ISMC consortium partners Next Orbit Ventures did not respond to a request for comment. Tower and Intel declined to comment. Singapore-based ISSS and India’s federal IT ministry did not respond to requests for comment.

Obstacle to VEDANTA

Most of the world’s chip output is limited to a few countries like Taiwan, and India is a latecomer. Amid much fanfare, in September, the Vedanta-Foxconn JV announced its chip manufacturing plans in Gujarat. Modi called the $19.5 billion plan a “significant step” in boosting India’s chipmaking ambitions.

But things didn’t go smoothly when JV tried to hunt down a technology partner. A fourth source said Vedanta-Foxconn has entered STMicroelectronics to license technology, but the Indian government has conveyed that it wants STMicro to have “more skin in the game” — in the form of a partnership stake.

STMicro is not interested in that and the talks are still tentative, the source added. “From STM’s point of view, this idea doesn’t make sense because they want the Indian market to be more mature first,” he said.

Deputy IT Minister Chandrasekhar told Reuters during a May 19 interview that the Vedanta-Foxconn JV was “struggling to tie up with a technology partner at the moment.”

STMicro declined to comment.

In a statement, Vedanta Foxconn JV CEO David Reed said they had reached an agreement with a technology partner to license the technology, but declined to comment further.

In a move to revive investor interest, India’s IT ministry announced on Wednesday that the country will once again start inviting applications for chipmaking incentives. This time, the companies can apply until December, which was only a 45-day window, unlike the first stage.

“Some current applicants are expected to reapply and new investors are also expected to apply,” Minister Chandrasekhar tweeted.

Reporting by Aditya Kalra and Munsif Vengattil in New Delhi and Jane Lanhi Lee in Auckland; Additional reporting by Steven Scheer; Editing by Nick Zieminski

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