Indian Finance Minister P. Chidambaram presented the annual Union Budget on Tuesday, indicating the government is well aware of what a good manufacturing industry can do for a country.
Intel may not have been happy with the incentives the government was prepared to give for its proposed semiconductor plant in India, but others have jumped into the fray.
“With the spread of information technology and IT-enabled services, the time is ripe to make India a preferred destination for the manufacture of semiconductors and other high-technology IT products,” said Mr. Chidambaram.
The products he envisions include wafers, semiconductors, flat panel displays, and storage devices.
To achieve this goal, the Ministry of Information Technology will announce a policy shortly, said Mr. Chidambaram.
The government will participate financially in these new projects wherever there is a monetary gap. However, the funding will have to be in place within three years, he added. With that announcement, the minister has begun the countdown for new projects.
The Right Incentives
The budget offers “the right incentives required for this industry to establish its roots and make domestic manufacturing of semiconductors and electronics a viable opportunity,” said Vinod Agarwal, chief executive of SemIndia, a consortium that will probably be among the first to set up a semiconductor manufacturing plant in India.
On Monday, Tessolve, a company that specializes in testing semiconductor chips, said it would invest $200 million to set up a testing plant in India (see IndiaGetsAnotherChipPlant).
Earlier this month, SemIndia announced the launch of its FabCity project in India’s southern state of Andhra Pradesh, with the first assembly unit costing $1 billion (see India Revs Up Fab City Plans).
The India Semiconductor Association (ISA) also released a study this month by Frost & Sullivan that contained some startling predictions. The study forecasts that consumption of electronics equipment in India will reach $363 billion by 2015 (see Indian Chips to Grow to $43B).
The semiconductor component of that amount alone will be worth $36.3 billion. At $363 billion, India will consume 10 percent of the global electronic equipment output.
Such large numbers call for a local manufacturing market, said Poornima Shenoy, president of ISA.
The Right Time
“Given the opportunities that India is forgoing due to substantial dependence on global markets for meeting its domestic demand, it is time we promote a robust semiconductor manufacturing industry in India,” said Ms. Shenoy.
Chips designed in India are currently manufactured in foundries located outside the country. This practice cannot continue for long due to cost considerations, especially when demand from within the country is so high, according to Ms. Shenoy.
“The decision to set up a committee with the Ministry of Information Technology to formulate the national semiconductor policy is timely,” she said. “This will provide India with the edge beyond VLSI [very large scale integration] and embedded design.”