At last, some movement towards an Indian semiconductor fab

New Delhi, September 14 2013: The Government has finally  accorded approval for setting up of two Semiconductor Wafer Fabrication (FAB) manufacturing facilities in the country.  This comes almost two years after an empowered committee  was set up to identify  technology and investors and to recommend incentives to be provided to set up two FAB facilities in the country. The Committee had issued a Global Expression of Interest inviting technology providers and investors to set up the FAB facilities. The two FAB facilities proposed to be set up are:

Jaiprakash Associates along with  IBM (USA) and  Tower Jazz (Israel). The outlay of the proposed FAB is about Rs 26,300 crore ( Rs 263 billion)  for establishing the FAB facility of 40,000 wafer starts per month of 300 mm size, using Advanced CMOS technology. Technology nodes proposed are 90, 65 and 45 nm nodes in Phase I, 28 nm node in Phase II with the option of establishing a 22 nm node in Phase III. The proposed location is Greater Noida.

Hindustan Semiconductor Manufacturing Corporation (HSMC) along with ST Microelectronics (France/Italy) and  Silterra (Malaysia). The outlay of the proposed FAB is about Rs 25,250 crore( Rs 252.5 billion) for the fab facility of 40,000 wafer starts per month of 300 mm size, using Advanced CMOS technology. Technology nodes proposed are 90, 65 and 45 nm nodes in Phase I and 45, 28 and 22 nm nodes in Phase II. The proposed location is Prantij, near Gandhinagar, Gujarat.

The incentive package  includes incentives already available under the Modified Special Incentive Package Scheme (M-SIPS) and deduction available for expenditure on R&D under the Income Tax Act. In addition, FAB facilities will also be eligible for investment linked deduction under Section 35AD of the Income Tax Act. The Government will provide Viability Gap Funding (VGF) in the form of an interest free loan for a period of 10 years.

The Government has also required the technology providers to take equity of at least 10% in the proposed projects. The Government will also get 11% equity in the said projects. The details of the incentives will, however, be worked out based on appraisal of Detailed Project Reports to be submitted by the two consortia within a period of two months.

The proposed FABs are expected to  create direct employment of about 22,000 and indirect employment of about 100,000.

The India Electronics & Semiconductor Association (IESA) deems the fab a highly strategic game changer for India, welcoming the fructification of the proposal.

IESA President PVG Menon says: "The presence of a local fab in India would boost the country’s capability to build IP assets within India. We reiterate that in terms of its impact and implications, the fab must be treated on par with India’s investments in her space and nuclear programmes."

"The commencement of building the fab comes at a time when the Indian economy is at a point of inflection. It will arrest project costs from further escalation and will give the Indian ESDM ecosystem a boost to take their place as a leader in the global economy."

"India, today consumes close to US$ 7 billion of semiconductor products every year. By 2020, when the total ESDM market is expected to reach US$ 400 billion, this consumption is expected to rise to touch US$ 55 billion. With the location of a fab in India, the country could achieve a degree of self-sufficiency in electronics, and partially reduce the very high supply chain risks that India is exposed to, without an alternate source for procurement."

Aninda Moitra, President & Managing Director, Applied Materials India comments  “Setting up of such a high value manufacturing industry as semiconductor chip fabrication will have truly transformative effect, on the overall Electronics industry. This will have a very strong multiplier effect that will result in major strides forward in the value generated from all sectors within the semiconductor ecosystem. While we eagerly await the formal news of the cabinet approval via the appropriate government sources, the historic significance of this approval will be felt for many years to come. Manufacturing in India will soon witness a new frontier.”