Intel Corp.., the world’s largest maker of computer chips, chose China and Vietnam over India for manufacturing bases after the Indian government delayed finalizing a semiconductor policy aimed at attracting multi-billion dollar investments needed to set up semiconductor plants.
“The government (semiconductor) policy was not timely for us,” Craig R. Barrett, Intel’s chairman, said. “The government did not have a well documented plan when we began discussion with (it).” After nearly three years of working on it, the Indian government in February announced a policy to support chip-making investments with about 25% capital subsidy, including tax breaks and interest-free loans running for up to 10 years.
Several chip makers, including Intel and Advanced Micro Devices Inc. (AMD), have studied Indian manufacturing units to service a booming local market for semiconductors. According to a study by trade body Indian Semiconductor Association, consumption of electronic equipment in India would rise to $363 billion (nearly Rs15 trillion) by 2015 from $28.2 billion in 2005 at a compound annual growth rate of 29.8%, pushing the total market for semiconductors to $36.3 billion by 2015.
Intel’s smaller competitor, AMD has already registered its presence in India through a licensing agreement for a proposed ‘assembly-test-mark-pack’ and semiconductor factory of SemIndia USA Inc. in Hyderabad.
Between the time Intel initiated the discussion with the government and the announcement of the semiconductor policy, Intel was already holding discussions in Vietnam and China, said Barrett, who was in Tindivanam, about 90km south-west of Chennai, to inaugurate a telemedicine project. In March, Intel announced plans to build a $2.5 billion, 300mm wafer fabrication facility in the Chinese coastal city of Dalian.
Intel, he added, has no immediate plans for a manufacturing unit in India though it has no issues with India’s semiconductor policy.
“Right now, we don’t have need for a manufacturing facility. But if we have future capacity expansion, India is high on the list,” he said. However, he declined to put a time frame on when they would be considering for investment, except to add that it would depend on growth in demand.
As per the government’s new policy, companies investing more than Rs2,500 crore in semiconductor manufacturing would be eligible for special incentives. If the unit were located in so-called special economic zones or SEZs, the incentive would total up to one-fifth of total expenditure in the first 10 years. If outside SEZs, the incentive would be one-fourth of total expenditure.
In India, the $35-billion Intel will focus on engineering and software activities and also on non-business initiatives in the areas of education and health care.
At present, Intel’s research and development (R&D) centre in Bangalore employs than 3,000 engineers. Recently, the Bangalore centre developed Intel Centrino Duo Core processor, which gave more computing power and increased battery life.
Barrett, who is also the chairman of the United Nations Global Alliance for Information and Communication Technologies and Development, said Intel, as part of the Intel World Ahead Program, would donate 500 personal computers for schools in Tamil Nadu, and also help in establishing wireless broadband connectivity at 50 locations in the state.