India's fab project fails to attract big chip players

Two consortia, led by Hindustan Semiconductor Manufacturing Corp. and Jaypee Associates, remain the top contenders to construct and equip proposed wafer fabrication facilities in India. No large semiconductors manufacturers have emerged as leaders for the project. HSMC is working with STMicroelectronics and Silterra, while Jaypee is collaborating with IBM Microelectronics and Tower Semiconductor.

Under the current proposals, Jaypee has tied up with IBM and Tower Jazz and has proposed a facility in Greater Noida with an investment of Rs 26,300 crore, while HSMC has partnered with ST Microelectronics and Silterra and has planned its unit at Prantij near Gandhinagar in Gujarat with an investment of Rs 25,250 crore.

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.

According to two government officials, the Department of Electronics and Information Technology (DeitY) has received only two new proposals - one by Interactivity Group (supported by a group of IIT alumni) and another by APSTL, an Arizona-headquartered technology firm. Even though an empowered committee set up to evaluate all the proposals is still studying them, an official said it is unlikely something concrete will come out of the two new applications.

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.

However, a lack of interest the second time around as well underlines the concerns about the feasibility of setting up fab units in the country. Experts argue the long-gestation period and the technology mandates of the government may diminish the usefulness of the projects when they finally come up. The facilities are expected to start production only sometime in 2017.