Plan set for India’s first big chip plant

A consortium of investors is planning to set up a semiconductor fabrication plant in India in collaboration with the Indian government and Advanced Micro Devices Inc (AMD), the participants announced Wednesday.

The consortium, called SemIndia Inc., hopes to tap into the growing domestic market for semiconductors, which it estimates will be worth $15 billion for logic chips alone in 10 years time.

AMD, of Sunnyvale, California, has signed an agreement with SemIndia that will allow it to license AMD’s process technology for the planned fabrication, assembly and testing operations, AMD said. AMD and SemIndia will also jointly develop and market semiconductor products for India, they said.

India’s electronics industry generated $10 billion in revenue last year and is growing at 24 per cent a year, said Vinod Agarwal, chairman, president and chief executive officer of SemIndia, which is based in Delaware. Most of the semiconductors used in India today are imported. The planned fabrication plant will also sell its products outside India, he said.

“We expect we will require an investment of about US$3 billion to set up the facility,” Agarwal said. The plant will make microprocessors for PCs as well as logic chips for mobile phones, set-top boxes and other electronic devices, he said.

SemIndia’s plan depends partly on securing an investment from the Indian government, Agarwal said. The government has not indicated the size of its investment yet. “We see this venture as a private-public partnership,” he said.

SemIndia also has not disclosed who are the investors in the fab, but indications are that it would be a mix of Indians abroad, other private investors, the Indian government and possibly AMD.

Agarwal and Hector Ruiz, AMD’s chairman, president and chief executive officer, signed a memorandum of understanding about their agreement in Delhi on Wednesday in the presence of Dayanidhi Maran, India’s IT and communications minister.

SemIndia’s plans signal the start of a new industry in India that will impact the entire economy and have a ripple effect on the growth of electronics manufacturing and embedded software development in the country, said Rajendra Kumar Khare, chairman of the Indian Semiconductor Association and head of the Bangalore subsidiary of U.S. chip maker Broadcom Corp.

The new fab will help create an ecosystem for semiconductor manufacturing in India and boost the country’s gross domestic product, he predicted.

India has been keen on having semiconductor facilities in the country. Maran met earlier this year with Intel Corp. Chairman Craig Barrett at the company’s headquarters in Santa Clara, California, to persuade Intel to set up a semiconductor test and assembly facility in India.

The absence of large-scale chip manufacturing in India has been a gray patch in the country’s emerging profile as a leading technology development location. Several semiconductor companies, such as Texas Instruments Inc. of Dallas, Texas, have chip design facilities in India, but they have been reluctant to set up fabs in the country, partly because of its poor infrastructure.

Indian government-owned Semiconductor Complex Ltd. (SCL) of Chandigarh operates a semiconductor fab with outdated process technologies and sub-optimal production scales. SCL has a 6-inch wafer fabrication facility, capable of processing wafers in 0.8 micron technology. It is used primarily for pilot production runs of chips they design.

Last year a Korean investor, Intellect Inc., signed a memorandum of understanding with the government of the state of Andhra Pradesh to set up a semiconductor fab under a shared model, in which companies invest in the fab in return for capacity. The project would require an investment of US$600 million, it said.

“If India wants to emerge as a technology power house and innovator, it needs to have a fab,” SemIndia’s Agarwal said

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