By Munsif Vengattil

BENGALURU (Reuters) - International semiconductor consortium ISMC will invest $3 billion in India's southern Karnataka state to set up a chip-making plant, the state government said on Sunday.

ISMC is a joint venture between Abu Dhabi-based Next Orbit Ventures and Israel's Tower Semiconductor. U.S. chip giant Intel Corp has announced plans to acquire Tower.

India’s first semiconductor fabrication unit is expected to generate more than 1,500 direct jobs and 10,000 indirect jobs, the state's investment promotion division said in a tweet.

ISMC and Indian conglomerate Vedanta Ltd have applied for Prime Minister Narendra Modi's $10 billion incentive plan to push companies to set up semiconductor and display operations in India, the government's next big bet on electronics manufacturing.

Vedanta told Reuters on Saturday it was in "advanced talks" with Gujarat and Maharashtra in west India and Telangana in the south to choose a site by mid-May. It has a planned investment outlay of $20 billion for its semiconductor and display push.

Modi and his IT ministers outlined plans on Friday for investment incentives in the sector, saying they want India to become a key player in a global chip market dominated by manufacturers in Taiwan and a few other countries.

India's semiconductor market is forecast to grow to $63 billion by 2026 from $15 billion in 2020, the government says.

(Reporting by Munsif Vengattil and Aditya Kalra in New Delhi; Editing by Clarence Fernandez and William Mallard)