Can India, like China, become the next silicon success story? This seemingly simple question has given birth to a debate that's roared across the global electronics industry since India unveiled broad new financial incentives designed to lure chip makers to the subcontinent last month.
Some call India "the last frontier for semiconductor manufacturing," and believe it will it be a magnet for companies like TSMC, AMD and Intel, the U.S. semiconductor giant whose fab site decisions--like the recent one to manufacture in China--can turn the fate of an industry.
"No way," insist other industry watchers, pointing to India's infrastructure shortcomings and late start in the chip-manufacturing sweeps. As the title of a recent JP Morgan Report puts it, "India and semiconductors: It's too late; just don't bother."
India's nightmarish infrastructure will never support chip making, the argument goes, whereas China's state-managed economy and bottomless pool of experienced, low-cost manufacturing labor is an insurmountable advantage. (Of course, China has its detractors too, and all is not rosy in the Middle Kingdom's silicon circle; see story, page 20.)
As compelling as these arguments may be, however, it turns out there are a number of ongoing semiconductor industry developments involving local companies and Indian investors, which indicates that India's aspirations for developing a domestic chip industry do not all hang on foreign direct investment.
"It's truly a global business today, with everybody competing with everybody," said Lee Chung, a vice president at Taiwan foundry United Microelectronics Corp. "Eventually, China and India will be on a collision course. There are a lot of intelligent people in both countries and they are targeting the same areas."
Inside India, many experts acknowledge that the country's semiconductor initiative has gotten off to a fitful start. "We ourselves have complicated this whole issue. Instead of working quietly with the government and getting the plans in place, companies went about beating the drums," said Rajendra Singh, co-founder of India Electronics Manufacturing Corp., one of a handful of local companies planning to construct wafer fabs in India. With all the hype that's been generated, he said, the whole issue of setting up manufacturing has become a bit of a mess.
"When I had a meeting with a large customer recently, I had a very hard time convincing them about the cost advantage of setting up a manufacturing unit here," Singh told EE Times. "Frankly speaking, they see no cost advantage here at all, and that is because almost all financial investors and analysts are coming out with reports that India does not need a fab."
A number of factors conspire to send out the wrong signals to the global investing community, according to Singh. He points to the way land prices have skyrocketed in the southern city of Hyderabad since the Fab City project there was announced a year ago; the fact that it took the government more than a year to develop its semiconductor policy; and the fact that many companies are talking about setting up plants here without concrete plans to back them up.
Fab City will be India's first microprocessor and silicon chip manufacturing facility for the IT industry. The $3 billion project is expected to create 5,000 jobs by 2009 and up to 1.4 million jobs by 2016 in 200 ancillary industries.
"The key issue here is to have a robust plan in place. We did announce the setting up of a $3 billion fab, but we know that this cannot be done overnight," said B.V. Naidu, the newly appointed managing director of SemIndia Systems and SemIndia Fab City. A public-private corporation with strong ties to both government and industry, SemIndia has been the most vocal advocate of India's move into semiconductors, but its approach has also come under fire (see story, this page).
When, or if, India will be able to attract the kind of inward investment that companies like TSMC and Intel are putting into China is yet to be seen. But the prospects of tapping into India's growing domestic electronics market have spurred many local companies to make investments of their own, in both systems (see story, page 25) and chips.
One of the latter is NT Silicon India Pvt. Ltd., a local company with ambitions to move into the lower reaches of the semiconductor market. NT Silicon is investing $670 million in an 8-inch semiconductor fab planned for Hyderabad. "I believe India is the last frontier for semiconductor manufacturing," said NT Silicon chairman and CEO June Min. "Although there are many hurdles in India, I am still placing my bets here."