Home > industry > Chip makers line up $600 mn for assembly units

Chip makers line up $600 mn for assembly units

Chip makers line up $600 mn for assembly units

Bangalore: India’s efforts to become a chip manufacturing hub may still be restricted to plans and blueprints but the country is attracting significant investments directed at setting up facilities to assemble, test, mark and package chips, with companies such as SPEL Semiconductor Ltd, SemIndia Inc., and Tessolve Inc. looking to invest $600 million (Rs2,358 crore) over the next three years in such so-called ATMP facilities.

And analysts say that in countries such as Taiwan, Malaysia and Singapore, ATMP facilities have served as a precursor to the development of chip making or fabrication. Companies operating in the ATMP space estimate the size of the industry at $20 billion, and its growth at 4.2% a year.

This year will see at least two ATMP facilities beginning operation in India. While SemIndia’s is to be completed by the end of the year, Tessolve’s is expected to be completed by September. The two projects were announced in 2005.

“On average, globally competitive ATMPs, such as the ones in Taiwan, have sales in the range of $3-4 billion. Compared with that, India has a long way to go and we are (account for) less than 1% of the global ATMP market. But with announcements of other ATMPs and the fab city (in Hyderabad), we can expect the supporting semicon(ductor) ecosystem to flourish," said D. Balakrishnan, chief operating officer, SPEL, which ended 2006-07 with revenues of Rs53.9 crore.

Chennai-based SPEL (formerly SPIC Electronics Ltd) is the country’s only commercial semiconductor chip assembly and testing company. In a bid to be globally competitive, SPEL planned to invest $286 million in a special economic zone (SEZ) near its existing facility in Chennai.

However, despite securing necessary approvals from the Centre, the company has put its SEZ plans on hold till 2009 citing procedural delays.

Meanwhile, SPEL is looking to raise $5 million of debt by July and another $20 million of debt and equity in 2009-10 as it expands its existing capacity. The company aims to almost triple its capacity from 435 million units per annum now to one billion units per annum in 2009-10.

SPEL has already raised $7.7 million in 2007-08 with $2.2 million coming from California Micro Devices Corp., and the rest from Indian Overseas Bank. It has 29 active customers, including Fairchild Semiconductor Corp. (Malaysia), California Micro Devices Corp., Alliance Semiconductor Corp. and Taiwan’s O2 Micro.

Not far from Chennai, in Sriperumbudur, the construction for an ATMP facility by the San Jose-based chip assembly and testing firm Tessolve begins next week, nine months behind schedule. V. Veerappan, co-founder and member of the board of Tessolve, said “the first two lines of the ATMP will come up by September or October this year."

He added that the company has “secured the first round of funding of $30 million two months back from investors in US," and expects a “second round of funding of $50 million to come in within the next six months."

Tessolve’s $200 million facility will have the capacity to produce three million packaged units a day. The company already has an engineering facility in Bangalore where it offers testing services. SemIndia’s $100 million ATMP facility at the proposed $3 billion fab city in Hyderabad has been delayed too. According to B.V. Naidu, managing director of SemIndia Systems Pvt. Ltd, this facility will now be functional only by late 2008.

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