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$3-billion project to manufacture semiconductors SemIndia zeroes in on Hyderabad

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Mr Rajendra Kumar Khare (left), Chairman of India Semiconductor Association, Mr Dayanidhi Maran, Union Minister for Communication and Information Technology, Ms Poornima Shenoy, President, ISA, at the Vision Summit in Bangalore on Thursday. - - G.R.N. Somashekar
Mr Rajendra Kumar Khare (left), Chairman of India Semiconductor Association, Mr Dayanidhi Maran, Union Minister for Communication and Information Technology, Ms Poornima Shenoy, President, ISA, at the Vision Summit in Bangalore on Thursday. - - G.R.N. Somashekar

Our Bureau

Hyderabad, Feb. 9

SEMINDIA and the Andhra Pradesh Government on Thursday said a $3-billion (about Rs 13,500 crore) project to manufacture semiconductors that go into computers, mobile phones and other digital devices would come up near the upcoming Hyderabad international airport.

The project, which was hotly pursued by Chennai, Bangalore and Hyderabad, would now be located in a 1,200-acre site near here. Along with this, two more semiconductor manufacturers Nano Tech and Cypress Semiconductor, too, have evinced interest in locating their bases in the Fab City and negotiations are on to woo some more semiconductor companies.

While the work of the phase one of the SemIndia project, which will see an investment of $1 billion, would begin next month, the second phase would have an overall investment of $2 billion. However, within months an Assembly Test Mark Pack Plant that would be used by AMD (Advanced Micro Devices) would initially be grounded. AMD is SemIndia's technology partner.

Addressing a press conference here on Thursday, the State Chief Minister, Dr. Y.S. Rajashekhara Reddy, the Chairman of SemIndia, Dr. Vinod K. Agarwal, the STPI Director, Mr B.V. Naidu, and Mr Pratap Kondumuri, a venture capitalist, along with senior Government officials, described this as one the largest investments ever made in the country in the technology sector and having the potential for a spin-off effect of drawing more companies.

India has missed the opportunity to be part of the hardware growth story and this isseen as a first step towards becoming a $33.6-billion semiconductor market employing about 36 lakh people by the year 2015, as projected by consultants Frost & Sullivan.

Dr Agarwal said the Chief Minister and his team of officials made a world of difference in the decision of locating this centre near Hyderabad. Though the announcement of the project location has been made, the promoters of the project and the State are awaiting a Central policy framework that encourages the hardware sector.

Though details of the financials were not given out, the project is likely to have 50 per cent equity from the promoters and strategic partners and 50 per cent debt component. Given its capital-intensive nature, the investment by strategic partners would be crucial. The company also expects to support Broadcomm's chip requirements.

Giving a perspective on the choice of Andhra Pradesh, Dr Agarwal said that they were in parleys with the three southern States. However, while the response from Tamil Nadu was not encouraging, Karnataka and Andhra Pradesh were in close contention. But the support from Dr Reddy and his team, as also the Union Minister for IT & Communication, Mr Dayanidhi Maran, helped finalise the deal.

The Chief Minister said although the State had made significant strides in software and business process outsourcing sectors, the missing element of hardware would now be bridged through SemIndia project. "We will do all that is necessary to ensure that this project comes through at the earliest providing huge job opportunity through both direct and indirect employment."

Giving a snapshot of what SemIndia would manufacture, Dr Agarwal said typically a chip that is made here could have structures that are more than 100 times smaller than the human hair.

(This article was published in the Business Line print edition dated February 10, 2006)
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