Reliance is said to be looking into a foray into chip manufacturing and is in talks with potential partners

According to two sources familiar with the company's strategy, billionaire Mukesh Ambani's Reliance Industries has begun considering a move into semiconductor production, which may satisfy its supply chain demands while also catering to India's expanding chip demand.

The telecoms-to-energy giant has undertaken early-stage negotiations with international chipmakers that have the potential to become technological partners, according to one person with direct knowledge of the plans. 

"There is intent, but no timeline," the individual said, adding that Reliance has "yet to make a call on whether they want to ultimately invest."

The names of the foreign chipmakers were not immediately known.

The sources refused to be identified since they were not authorized to speak to the media. Reliance did not reply to numerous requests for comment, despite the fact that its interest in developing chips was already unknown. 

India's IT ministry and Prime Minister Narendra Modi's office both declined to comment.

Modi has stated that he wants his country to become a global chipmaker, but his objectives, which he originally stated in 2021, have experienced obstacles. The country currently lacks chip manufacturing units, however India's Vedanta and Taiwan's Foxconn are both trying to establish them.

According to the sources, Reliance sees value in entering the semiconductor market since it will help protect its telecom and electrical device industries from chip shortages. For example, in 2021, the conglomerate postponed the release of a low-cost smartphone it was developing with Google, claiming a chip shortage. 

They observed that demand for semiconductors is expanding in India and throughout the world. The Indian government predicts that the domestic semiconductor industry would be worth $80 billion (almost Rs. 6,64,200 crore) by 2028, up from $23 billion (approximately Rs. 1,90,960 crore) now.

According to Arun Mampazhy, a former India executive of US-based chipmaker GlobalFoundries, Reliance, which has a market value of approximately $200 billion (roughly Rs. 16,60,530 crore), would be one of the best-positioned firms in India to venture into semiconductors. 

"They also have deep pockets and know how to work with government," he added.

However, chip production has a history of boom and bust cycles and demands a high level of competence.

"Getting a tech partner - as a joint venture or through technology transfer - is the make or break point" for Reliance, according to Mampazhy.

Despite the government's pledge of $10 billion (roughly Rs. 83,030 crore) in incentives, India's chip aspirations have suffered setbacks. 

A $19.5 billion (almost Rs. 1,61,930 crore) joint venture between Vedanta and Foxconn failed in July before it ever got off the ground, as the two parties struggled to locate a tech partner, with Foxconn arguing that the project was moving too slowly.

Foxconn has since opted to invest in India without the involvement of Vedanta.

ISMC's plans to invest $3 billion (almost Rs. 24,900 crore) in India, a joint venture between Abu Dhabi-based Next Orbit Ventures and Israel's Tower Semiconductor, have advanced slowly since Intel attempted to purchase Tower. Later, talks between Intel and Tower fell through.

According to a third person with firsthand knowledge of the conversations, Reliance has been mulling a $300 million (almost Rs. 2,490 crore) investment that would give them a 30% interest in the company for months.

Tower and Next Orbit Ventures did not reply to requests for comment.