The Hindu Business Line : `Semiconductor industry needs leg-up from Govt'

The biggest impediment to the growth of the semiconductor industry in India is probably the slackness of the Government in announcing a firm package of incentives on par with the rest of the world.

Industry sources are hoping to hear some positive announcement very soon. "The spin-off effect would be terrific if the policy meets the expectations of the private equity investors. There would be no looking back then. The Indian semiconductor industry would lead the world in the decades to come,'' said Dr Vinod.K. Agarwal, Founder Chairman and CEO of SemIndia.

Sharing details about the distinct projects (SemIndia and Fabcity - an infrastructure project) in which his company is involved, he said: "SemIndia is in the process of setting up a semiconductor fabrication unit, an estimated $3-billion project for the manufacture of semiconductor wafer chips within Fabcity. We have commenced work on the first phase, which is all about Assembly, Test, Mark and Packaging (ATMP). This is expected to be completed by mid-2007. We began the ATMP phase ahead of any incentives from the Central Government, but have decided to wait for some policy announcement before commencing the second phase - Semiconductor Wafer Fabrication.''

Dr Agarwal said the company has applied to lease 75 acres from Fabcity. Elaborating on the infrastructure project, he said the Government of Andhra Pradesh allocated 300 acres to a Special Purpose Vehicle called Fabcity India Private Ltd. An additional 900 acres is expected to be allocated in future. According to him, a weak policy would attract only ATMP companies, solar panel companies and small fabrication units for analog ICs to establish shop in Fabcity, while a firm one would lure large investments in this space. .

Fab building

On complexity and technology behind a wafer, he said, "a Fab building cannot be compared to a technology park. To get a wafer fabrication building started, the building cost alone would work out to more than Rs 1,000 crore and such specialised building cannot be used for anything else. A completed structure would cost more than Rs one lakh/sq ft, exclusive of electrical back-up systems. Getting ahead of Government policy and paying excess interest would not be a wise financial decision,'' he added.

Studies by Frost and Sullivan reveal that India would be able to attract direct revenues worth $40 billion over the next decade (by 2015) from investment in Fabs.

Incentives offered

Stating that the policy makers in every other country had extended incentives to semiconductor Fabs by providing the entire infrastructure free-of-cost to fab companies, he said, "unfortunately in India, there is no infrastructure for manufacture of semiconductors. We are currently the only company in India to be making some investment in developing the infrastructure in Fabcity.''

"We will be partnering with IMEC (Europe's leading independent nano-electronics and nano-technology research institute) for developing foundry compatible Complementary Metal-Oxide Semiconductor processes for logic and mixed signal products,'' he said.