BANGALORE — It has finally happened. The long-awaited decision to set up semiconductor manufacturing facilities in India has been announced by the Minister for Communication and Information Technology, Kapil Sibal, on Friday, September 13. Sibal told EE Times:
Two consortia have proposed to build semiconductor wafer fabrication units in India. One of the consortia comprises International Business Machines, India's Jaiprakash Associates and Israel's Tower Jazz. The second comprises Hindustan Semiconductor Manufacturing Company (HSMC), STMicroelectronics and Silterra.
The investment in the first fabrication unit will be $4 billion while the second unit will have a total investment of around $3.9 billion, according to a Reuters report.
The whole point of setting these two fabs is to reduce imports (currently about 80 percent of the domestic requirement is met through imports). The move is seen as part of a plan to reduce dollar outflow at a time when the economy is battling a record current account deficit, which has also impacted the rupee.
Although there are many skeptics who feel that the fabs would go the way the earlier ones did, the government officials are quite positive about this development.
M.J. Zarabi, who headed the Empowered Committee responsible for the feasibility study for the setting up of a fab, told EE Times:
This is a decision that we have been keenly looking forward to. It is indeed a momentous decision that is expected to be a game changer as far as Indian electronics industry is concerned. I am sure all the electronics professionals are tremendously enthused by this decision.
Also for Ajay Kumar, the soft-spoken joint secretary of the Department of Electronics and Information Technology, who has always been championing the cause of a fab in India at almost every forum he speaks at, this is a culmination point for his espousal. He had always believed that if India had its own fab, then it would be easier to make a mark on the global hardware map.
He has been spearheading the "preferential market access" policy which states that whoever comes in to set up a fab would gain access to a large Indian/government market. Say, for instance, supplying chips for the Aadhaar card, a unique identification project set up by the Indian government to provide a 12-digit unique number to over 1 billion residents in India. Other areas of market access are in the changing of manual electricity/energy meters to smart cards, voting IDs for all the citizens, and driving licenses, all of which run into hundreds of millions cards.
At present, electronics imports are growing so fast that by 2020, they are projected to eclipse the oil import bill. India's semiconductor imports were $8.2 billion in 2012, according to Gartner. The demand is growing at around 20 percent a year, according to the Department of Electronics and Information Technology.
And, against this background, the setting up of a fab seems the only logical way out, though some would still argue that there is a lot more to the hardware story than just a fab or two. Getting India's infrastructure -- power, water, and roadways -- in good shape is more crucial than setting up manufacturing plant.
A design firm CEO who preferred to be anonymous told us:
If the government is not able to pull its act together and get the infrastructure moving in the right direction, there is no point in having the best of the chip manufacturing facilities here. How are we going to transport them with roads and logistics being a nightmare that they are today? Look at Bangalore or Mumbai today. When there are rains, the roads are a worse mess. Do you think you can transport chips on this crater-filled and potholed surface? Sure, you can but at what cost? Transport costs are going to shoot up -- as well as power costs and all this has to be kept at a competitive level as well.
Well. The die has been cast, so let's wait for a couple of decades for the real effect to come through. That's how long it has been for countries like China and Taiwan to be successful.