Fab At Dholera: Can It Be India’s Own Hsinchu?

In March of this year, executives from the Tata Group assembled in Gujarat for the foundational ceremony of India’s first semiconductor fabrication facility (fab) in Dholera.

Tata Electronics Private Limited, a key entity within the Tata Group, is building this megafab with an investment of Rs 91,000 crore in partnership with Taiwan's Powerchip Semiconductor Manufacturing Corporation (PSMC).

The ceremony underscored Dholera’s rise from a low-lying area, mostly submerged under seawater, to India’s first “semicon city.”

Repeating Historical Trends

Once an ancient port city strategically positioned at the heart of the Gulf of Khambhat, Dholera boasts a rich maritime legacy. In 2008, a plan to transform Dholera into Gujarat’s first special investment region (SIR) was conceived. Nestled along the Delhi-Mumbai Industrial Corridor (DMIC), the Dholera SIR is the biggest of eight smart cities being built along this route.

Envisioned as a "city rising from dust," Dholera’s greenfield development spans 920 square kilometres (km) — twice the size of Mumbai. However, beyond its appeal as twenty-first-century India’s urban experiment, Dholera is now a key cog in expanding India’s role within the world’s chip supply chain.

In 2022, the state government unveiled plans to establish a “semicon city” on 5,000 to 10,000 acres within Dholera SIR as part of the Gujarat Semiconductor Policy (2022-27).

Under this policy, eligible projects would benefit from a 75 per cent subsidy on the purchase of the first 200 acres of land and a 50 per cent subsidy on any additional land required for fabrication or related upstream and downstream projects approved under the India Semiconductor Mission.

Moreover, these projects would also be entitled to receive power and water at subsidised rates, further incentivising development in this region.

The efforts delivered some encouraging results when, in March 2023, Taiwan’s Hon Hai Technology Group, popularly known as Foxconn, and Vedanta Group announced plans to produce semiconductors locally with a $19.5 billion investment — one of the largest corporate investments in India’s semiconductor industry.

However, the Foxconn-Vedanta venture ultimately did not materialise. 

Yet, Dholera found its fortune when the Centre approved a proposal from Tata Electronics to build a mega semiconductor fabrication facility in Dholera in partnership with PSMC.

Ticking The Right Boxes

Touted as India’s answer to Shenzhen, the manufacturing powerhouse of southern China, Dholera has much to offer, particularly land and power infrastructure. 

Building a chip fabrication facility is a highly capital-intensive endeavour, often exceeding $15 billion due to the costs of advanced equipment and infrastructure. In this context, the generous land cost incentives under the Gujarat Semiconductor Policy make Dholera a particularly attractive destination. 

Dholera’s energy infrastructure is equally impressive. It boasts of a 4,400 MW solar park, being developed by Gujarat Urja Vikas Nigam Limited (GUVNL) under a public-private partnership (PPP) model.

Making microchips also requires a lot of bespoke ingredients. Some of India’s biggest chemical plants are located in Dahej, a mere four-hour drive from Dholera. 

Dholera’s strategic location also benefits from accessibility to local suppliers, a crucial factor for maintaining the continuous operations of a semiconductor plant. For a facility like Tata Electronics’ semiconductor fab to run efficiently, it will likely need the support of around 300 distinct suppliers in close proximity.

Connectivity

A semiconductor fab in Dholera will have the advantage of easy connectivity too — whether by air, sea, road, or rail. 

An international airport is coming up at Navagam village, a mere 28 km from Dholera SIR. Being developed by the Airports Authority of India (AAI) with an investment of Rs 1,305 crore, the airport will feature two parallel runways, designed to accommodate wide-bodied, long-haul aircraft like the A380.

Phase 1, with a 3,200-metre (m) runway, is scheduled for completion by 2025 and is projected to handle 1.5 million passengers annually. The second phase, with an even grander 3,800-m runway, will expand the airport's capacity to serve up to 100 million passengers annually in the years to come.

This would also be India’s first high-speed integrated multimodal corridor, combining both expressway and rail infrastructure. This opens the door to future enhancements, such as a potential regional rapid transit system (RRTS) connecting Ahmedabad and Bhavnagar via Dholera.

Further, the government has sanctioned Rs 466 crore for the construction of a 23.33-km broad-gauge rail line linking Dholera to Bhimnath. This rail line will integrate Dholera SIR with the Western Dedicated Freight Corridor (WDFC) at Sanand. Once realised, this project will provide Dholera SIR with direct rail connectivity, providing fast and efficient transport for both raw materials and finished goods.

While Dholera’s legacy as a port town is well known, plans to redevelop the Dholera port were shelved by the state government in 2009. As a result, the nearest port facility now lies at Pipavav, about 200 km away, serving as the primary maritime link for the SIR.

Lessons From A Taiwanese Tech City

Dholera’s ambitions to rise as India’s chip city can draw inspiration from Hsinchu, a northern Taiwanese city located about 80 km from Taipei and home to the world-renowned Hsinchu Science Park.

Merely four decades ago, Hsinchu was a quiet town, renowned for its tea farms and infamous for its snakes. Today, it has become synonymous with Taiwan's semiconductor industry.

Hsinchu’s dramatic rise from a "monga-bo" — a Taiwanese slang for “graveyard” — to the nerve centre of Taiwan’s chip industry began in the 1980s, when the Taiwanese government introduced a series of incentives, including tax breaks and favourable land deals to lure world-class talent. 

At the core of Hsinchu’s success story is Taiwan Semiconductor Manufacturing Company Limited (TSMC), now the world’s most valuable chipmaker. The city is also home to MediaTek, the world’s second-largest mobile chip developer, and United Microelectronics Corporation (UMC), Taiwan's first homegrown chip producer and the world's third-largest contract chipmaker.

Today, Hsinchu has evolved into a largely self-sufficient ecosystem, with the nearby Baoshan reservoir supplying the critical water needed for semiconductor manufacturing, while all major gas suppliers operate in close proximity.

Moreover, Hsinchu is home to two top-tier universities — National Yang Ming Chiao Tung University and National Tsing Hua University — both renowned for their semiconductor programmes. These institutions ensure a continuous influx of talented engineers, ensuring Hsinchu’s continued dominance as a global semiconductor powerhouse.

Indeed, the profound impact of Hsinchu Science Park on the success of Taiwan's technology and chip industry was eloquently underscored by Morris Chang, the founder of TSMC, during the fortieth-anniversary celebration for the park on 15 December 2020. 

Chang remarked, “If it were not for the science parks that offer all the infrastructure and land, a lot of tech companies may not be possible today."

Hsinchu Blueprint

Hsinchu’s story provides invaluable lessons for Dholera.

Although the government has laid a robust foundation with extensive road networks and power infrastructure, Dholera largely remains a vast, barren landscape, with only a handful of factories sporadically dotting the area.

Expansive stretches show little sign of life, lacking the residential neighbourhoods, parks, schools, and restaurants that are vital for cultivating a vibrant community.

It was in March this year when the state government began work on developing the social infrastructure necessary to support the skilled workforce expected to inhabit the area.

In its early days, Hsinchu was an isolated, underdeveloped town where engineers were met with wilderness and scant infrastructure. Hsieh Chi-chia, co-founder and honorary chairman of Microelectronics Technology, reminisced about those early days, saying, “Can you imagine? You could see snakes in the dormitories of the science park, and if you tried to shoot a film here, the only thing you could see were flies. The school here couldn’t find enough students. Really, no one wanted to live here when I got here." 

Yet, the semiconductor revolution in Taiwan, sparked by the emergence of TSMC in 1987, not only transformed Hsinchu but also reshaped the entire nation’s economy. For Dholera — and, by extension, India — a similarly pioneering force is crucial.

Despite their differences, the parallels between the two cities are striking. TSMC’s groundbreaking business model of contract chip manufacturing, which allowed it to focus on production without needing to design its own chips, revolutionised the industry. This model paved the way for fabless giants like Apple and Nvidia, who are now among TSMC’s largest customers.

Dholera appears to be following in these footsteps. The Tata-PSMC foundry serves as the cornerstone of Dholera’s chip ambitions, with Tata Electronics indicating plans to establish two more semiconductor fabs in the region, aiming to produce chips locally to meet global demand.

While this transformation may take time, the Tata-PSMC foundry could serve as a catalyst for a thriving chip industry that has long eluded India, propelling Dholera to the forefront of global semiconductor production — much like Hsinchu’s rise reshaped Taiwan’s fortunes.