Germany’s Infineon Technologies AG, one of the world’s top semiconductor firms, has teamed up as technology partner for a multi-billion-dollar silicon chip design and manufacturing facility in India.
The facility will be built by Hindustan Semiconductor Manufacturing Co. (HSMC), a firm floated by Deven Verma, a non-resident Indian who is also managing partner of the US-based venture capital firm, Edgewood Ventures.
The exact financial contours of the venture couldn’t be ascertained, but investments are likely to reach $3 billion (Rs12,900 crore) within a few years, beginning with an initial commitment of $500 million from a group of investors led by Verma.
Verma and the CEO of the Munich-based Infineon Technologies, Wolfgang Ziebart, are scheduled to announce the partnership along with information technology minister Dayanidhi Maran.
Verma, who is slated to be the chairman of the venture, declined to comment on the project and would only say that “we will announce the technology partner on Wednesday”.
The proposed investment stems from the government’s new semiconductor policy unveiled in February, under which up to 25% of the capital costs is promised as subsidies to chip-makers who set up facilities before 2010. Other incentives include certain tax breaks as well as interest-free, 10-year loans.
The policy seeks to make India an attractive destination in order to grab a slice of the $260 billion chip business from heavyweights such as China and Taiwan. The global chip market is growing at 12% annually. The local market too is attractive, currently valued at about $800 million, but expected to hit $35 billion by 2016.
India has hundreds of chip-design firms, but in the absence of local manufacturing facilities, chips designed here end up being manufactured in China, Taiwan or Thailand.
The proposed new facility will be another step towards combating this, and will be the second such facility to be formally announced in India. In 2006, SemIndia Inc., floated by a group led by professor-turned-entrepreneur Vinod K. Agarwal, announced plans to build one in Hyderabad with technology from US-based chip-maker Advanced Micro Devices.
The new chip facility will be be developed in two phases. The first will focus on technology development and the second phase will concentrate on high-volume production.
“India is a greenfield and not known for the production of silicon wafers,” says a person familiar with the proposed facility who didn’t want to be named ahead of the formal announcement by Maran. “In order to minimise the risks, we are starting with 200-mm, 8-inch wafers. We will first focus on getting the technology and training the people. We will perfect the technology first and then implement the 300-mm, 12-inch wafer fab.”
Infineon has annual sales of EUR7.9 billion and operates a research and development centre in Bangalore. Verma, who is also the founding general partner of Redwood Ventures is a former Loral Corporation who also worked as a senior diplomat at the Indian Embassy in Washington DC during the late 1970s.