lntel, Indian minister dispute plans for assembly plant

India’s minister for IT and communications said Tuesday that Intel Corp has decided to invest about US$400 million in an assembly and testing facility in the country. Intel denied the move, however, prompting speculation that the minister may be pushing the chip maker’s hand.

Intel, in Santa Clara, Calif., has short-listed Chennai, Bangalore, and Noida (near Delhi) as possible locations to set up the facility, IT and communications minister Dayanidhi Maran told reporters in Delhi.

Intel had considered locating the facility in Vietnam or China, but chose India after a meeting last week between Maran and Intel’s chairman, Craig Barrett, the minister said.

However, Intel would not confirm the plan.

“We constantly evaluate sites for future facilities,” said a spokeswoman at Intel India. “We have teams of experts continually assessing sites and from time to time we see this kind of speculation. We have nothing to announce at this time.”

If Intel had decided to set up a facility in India it would likely have made the announcement itself, rather than allowing Maran to do so, according to one industry analyst.

“This could be one of Maran’s tactics to pressure Intel to set up a facility in India, which is a big market for the company,” said the analyst, who asked not to be identified. India already has a design facility in Bangalore which works on some of Intel’s processors.

Maran was on a tour of the U.S. last week where he approached a number of technology manufacturing companies about setting up facilities in India. Several of those companies have shown interest in such a move, he said.

One of Maran’s key roles as IT minister is attracting investment in manufacturing in India. The country has won business from multinationals in the areas of research and development (R&D) and software services, but India has not been seen as a hot location for manufacturing due to infrastructure bottlenecks.

During a recent visit to India, K.Y. Lee, chief executive officer of Taiwanese electronics maker BenQ Corp., said his company would not manufacture in India because the country lacked the transportation infrastructure and a big enough base of component suppliers. However, last month it did set up an embedded software development facility in Mumbai.

Some telecommunications vendors have announced plans to manufacture in India. Nokia Corp. of Espoo, Finland, said last month that it will manufacture base station controllers in Chennai by next year, in addition to the handsets it had already said it will make in the country. Telefonaktiebolaget LM Ericsson, of Stockholm, makes base stations in India. And Elcoteq Network Corp. of Espoo has set up an electronics manufacturing facility in Bangalore.

The attraction for these companies is an anticipated boom in mobile telephone use in India. India’s mobile phone subscriber base touched 100 million in April, and the government now aims to have 250 million subscribers by 2007. Bharat Sanchar Nigam Ltd. (BSNL), India’s large state-owned telecom services provider, plans to introduce a change in its purchase policy that will require its suppliers to manufacture equipment locally. The change in BSNL’s policy is to ensure better service backup from the vendors, Maran said in April.

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