NEW DELHI - Hon Hai Precision Industry, assembler of most of the world's iPhones, plans to build a chipmaking facility in India with a local partner to tap rising demand for semiconductors and the government's support for such projects.

A joint venture of Taiwan's Hon Hai, known also as Foxconn, and metals company Vedanta will set up a factory in Gujarat, the home state of Prime Minister Narendra Modi.

The total investment in the project, which includes semiconductor fabrication, assembly and testing, as well as display production, is set to reach 1.54 trillion rupees (S$27 billion), Vedanta said in a statement Tuesday.

While the partners have little experience running large chip operations, they are betting on rising demand, as everything from smartphones and cars to home appliances contain an increasing number of semiconductors.

Mr Modi's government late last year unveiled a US$10 billion incentive plan, offering to cover as much as half of a project's cost, to lure display and semiconductor fabricators to set up base in India.

India is also the world's No. 2 smartphone maker.

The companies plan to build the chip manufacturing plant within the next two years, and the total project will employ about 100,000 people, Vedanta said.

Hon Hai will own 40 per cent of the chip venture and Vedanta the rest. The Taiwanese company will not be involved in the display plant.

When the companies announced their intention for a joint venture in February, Hon Hai said it would invest about US$118 million in its 40 per cent stake.

The planned venture is set to make chips using mature 28-nanometre technology.

India's smartphone industry is concentrated in southern India, and the new venture could face challenges attracting skilled workers to the western state of Gujarat.

Hon Hai is the world's largest contract manufacturer of electronics and only runs minor chip fabrication operations.

Billionaire Anil Agarwal's Vedanta produces metals, including aluminium and copper. BLOOMBERG