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IBM, ST Microelectronics only players keen on wafer fabrication unit; government to share 40% of total cost

India is going ahead with the two consortia it approved in-principle — IBM and ST Microelectronics.

, ET Bureau|
Jan 03, 2014, 03.00 AM IST
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With the government’s support for setting up the fab firming up at about 40 per cent of the total cost, officials were keen on figuring out if other chipmakers could also be enticed to show interest.
With the government’s support for setting up the fab firming up at about 40 per cent of the total cost, officials were keen on figuring out if other chipmakers could also be enticed to show interest.
BANGALORE: After failing to attract global chipmakers such as Intel and Samsung for setting up a semiconductor wafer fabrication unit, India is going ahead with the two consortia it approved in-principle — IBM and ST Microelectronics.

“The (two) consortia are very bullish,” a senior industry executive said. They have accepted the terms of support outlined by the government of India, and they will now work on detailed project reports, which could take as much as six months to be ready for submission, the executive said.

With the government’s support for setting up the fab firming up at about 40 per cent of the total cost, officials were keen on figuring out if other chipmakers could also be enticed to show interest.

Typically, setting up a chip foundry costs around $4-5 billion (Rs 24,800-31,000 crore). “The idea was, with the incentives firmed up, could we push the fence-sitters off the fence, but that didn’t happen,” the industry executive said. The deadline to submit initial plans in the fab under a separate call for expressions of interest ran out in November, and there have been no new viable plans submitted other than the two the government had already approved in-principle.

India is trying to create an electronics manufacturing ecosystem to prevent the loss of billions of dollars of foreign exchange in such imports every year. This bill, expected to reach $55 billion (aboutRs 3.4 lakh crore) by 2020 from about $7 billion (Rs 43,600 crore) now, is projected to outstrip oil imports, according to a report commissioned by the industry lobby India Electronics and Semiconductor Association last year.

“We received many rejections and only a couple of expressions-of-interest. We would go ahead with the two fabs which have got in-principle approvals,” said the official requesting anonymity, as he was not authorised to speak to the media. “There have been ongoing dialogues with these firms, but Taiwan Semiconductor Manufacturing Company (TSMC), for instance, said they just don’t have the bandwidth for a new greenfield project,” the industry executive confirmed.

“The two fabrication units which have got in-principle approval would be ready to manufacture chips in next two to three years,” said Ajay Kumar, a joint secretary at India’s department of electronics and information technology. The company was keen to share its experience on setting up and running fabs and the supply chains around it.

“Our manufacturing requirements are being met by our existing facilities around the world and we see no requirement to expand. Thus, we don’t have any plans to set up a fab in India or anywhere else,” an Intel spokesperson said in an email. However, the company was keen to share its experience on setting up and running fabs and the supply chains around it. “Ultimately, we would be willing to help the government create an effective ecosystem for local manufacturing,” the spokesperson said. Samsung declined to comment, and an email to TSMC didn’t elicit a response at the time of going to print.

In September, India approved one group consisting of Jaiprakash Associates, IBM and Tower Jazz of Israel and another comprising ST Microelectronics, Hindustan Semiconductor Manufacturing Corporation and Silterra of Malaysia. Chips from this fab won’t exactly be cutting edge, but the fab would be a step towards cutting India’s electronics import bill. These chips will typically go into television set-top boxes, televisions, various smartcards and some automobiles.
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