Bangalore: Ayear after India announced a semiconductor policy, its first, to facilitate investments in the business and encourage chip manufacturing in the country, the government has not received any formal applications to set up chip making, or fabrication (fab for short) units.
Two companies, SemIndia Systems Pvt. Ltd and Hindustan Semiconductor Manufacturing Corp. (HSMC), have made public announcements about their fab units but are yet to apply to the government for permission to set up the same.
The policy has resulted in investments or proposals for investments of around Rs40,000 crore, but this does not include any for chip making plants, said M. Madhavan Nambiar, special secretary, ministry of communications and IT.
“A formal proposal to set up chip fab unit with a Rs25 lakh fee (that needs to be sent along with the application as an indication of seriousness) hasn’t yet come to us, but we expect some announcements in the next two months,” Nambiar added on the sidelines of the third annual event of industry body Indian Semiconductor Association (ISA) in the city.
The first made-in-India chip is not likely to hit the market before 2010. Front-runners SemIndia and HSMC have said they will invest $3 billion (Rs12,030 crore) and $1 billion, respectively, in their fab units. But executives at both firms said they needed time to identify potential investors and plan their units, and that their applications would be submitted soon after the companies had raised money.
On an average, a fab rolls out its first chip two years after the beginning of construction of the plant.
SemIndia’s chief executive officer Vinod Agarwal had said in April 2006 that the country’s first chip unit would start production this year; construction of the facility is yet to start. “It will take 10-12 months for financial closure and then 24 months for the construction to be completed,” added B.V. Naidu, SemIndia’s managing director. SemIndia’s $100 million assembly and test facility at the so-called Fab City in Hyderabad is under construction.
Last March, HSMC announced it would build two fab facilities. According to the mission statement on its website, the company intends to be “the leading manufacturer of semiconductor products in India by 2009.” But with no formal proposal sent to the government, HSMC will likely miss its deadline.
“We never announced any timeline for the project, to begin with. We want to be thorough with our planning and it takes time to finalize financials, company structure and technology investments,” said Devendra Verma, chairman of HSMC .
However, HSMC’s technology partner for the fab unit, Infineon Technologies AG, is confident that the project will eventually take off and is committed to it. Reiner Schonrock, senior principal, media relations, Infineon, said his company is “waiting to provide the technology but the fab unit has to start first.” He added that the company had not ruled out the possibility of investing in the fab unit.
Union minister of state for commerce Jairam Ramesh said the government has done its job by releasing an “investor-friendly” semiconductor policy, but that it was up to the industry to set the ball rolling on fab units.
While the companies have expressed confidence in the semiconductor policy, an ISA executive said the government could do more.
“There has to be continued support from the government in the form of subsidy, funds or grants. One-time announcement of a policy is not the beginning and end,” said Poornima Shenoy, president of ISA. She added that Taiwan’s government provides “seed funding” to fabs and that India could consider doing the same.