The Hindu Business Line : Fab plants not feasible in India: Gartner

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Hyderabad Feb. 6 It started off as yet another presentation involving clutches of figures and quotes from research reports, but it segued into a lively debate - on whether or not India needs investments in semiconductor fabricating.

Speaking at the annual conference of the India Semiconductor Association, Mr Bryan Lewis, Research Vice-President & Chief Analyst, Gartner Dataquest, said that investing in fab plants in India did not make economic sense.

He said that by 2009, the world would see an excess capacity of fab and rather than compete against those who had better economies of scale, India would do better to focus on its strengths - design and developing software that goes into chips.

Mr Lewis, who spoke on the theme, `what is the best semiconductor strategy for India given the worldwide trends', noted that the next generation chips would have multifunctional processor cores and said that fab units were "not set up to capture the software" that goes into the chips. That, he said, was an opportunity for India.

China's strategy, Mr Lewis noted, was to develop semiconductor fabs using older technology and suggested that India could also follow the model.

"Semiconductor is an international story. It doesn't matter where the product is produced," he said, stressing that economies of scale was important to keep costs low.

Speaking immediately after Mr Lewis, Mr Ajay Marathe, COO, SemIndia, took the opposite stand and stressed that India would be missing a big opportunity if it did not get manufacturing here.

He noted that the semiconductor industry was projected to grow to $ 40 billion by 2016 and posed to the audience if the demands of the industry ought to be met from imports.

When the question and answer session began, a member of the audience stood up and said, "Mr Lewis, you are wrong and Ajay is right."

"We need manufacturing know-how here," the participant, who said he was an ex-AMD employee, said. Pointing out that Samsung needed to build its next fab plant, he asked Mr Lewis where the Korean giant would locate the plant. Korea? US? Taiwan? "It has no choice but India," he said.

More participants joined in the debate on these lines, but Mr Lewis kept defending his stand. Finally, the debate ended on the note that the economics depended upon whether or not the government would chip in with funding to make a fab project in India viable.