IBM, STMicro in $8-bn chip JVs in India

Global chip majors IBM and ST Microelectronics have proposed setting up two semiconductor manufacturing projects in India, in collaboration with Indian partners. The two will be part of a $8-billion (over Rs50,000 crore) investment in two joint venture semiconductor wafer fabrication (FAB) projects.

The Government of India has approved the setting up of two semiconductor wafer fabrication (FAB) manufacturing facilities in the country as part of a move to give a big boost to the electronics system design and manufacturing eco-system in the country.

Under the government approved concessions, Jaiprakash Associates along with IBM (USA) and Tower Jazz (Israel) will set up a FAB unit with an outlay of about Rs26,300 crore.

The facility, which will use Advanced CMOS technology, will have a production capacity of 40,000 wafers of 300 mm size per month.

Technology nodes proposed are 90nm, 65nm and 45nm in Phase I and 28nm node in Phase II, with the option of establishing a 22nm node in Phase III. The unit is proposed to be set up in Greater Noida, near Delhi.

Hindustan Semiconductor Manufacturing Corporation (HSMC) will team up with Franco-Italian chip maker ST Microelectronics and Silterra of Malaysia.

The proposed FAB project will invest about Rs25,250 crore to produce 40,000 wafer per month of 300 mm size, using Advanced CMOS technology.

Technology nodes proposed are 90nm, 65nm and 45nm in Phase I and 45nm, 28nm and 22nm nodes in Phase II. The project is proposed to be set up at Prantij, near Gandhinagar, Gujarat.

Under the concessions, the government will offer a package of incentives for the two consortia, which 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 also provide viability gap funding (VGF) in the form of an interest free loan for a period of 10 years.

Technology providers will have to take equity of at least 10 per cent in the proposed projects.

The government will also get 11 per cent equity in the projects. Details of the incentives will, however, be worked out on the basis of an appraisal of the detailed project reports, to be submitted by the two consortia within a period of two months.

The government hopes the concession will help attract other chipmakers as well. The government will soon come out with an `Expression of Interest', inviting proposals from other leading companies intending in establishing FAB units in India.

The government wants local production of chips to cut long-term import bills. However, given the huge investments, long build-up period of plants and low freight costs to import chips from abroad there is "no great interest", and the only way to attract investments was through offering such major concessions, said minister of communications and information technology Kapil Sibal.

"India needs not less than 15 FABs (fabrication units)," Sibal told reporters on Friday.

However, Ganesh Ramamoorthy, a research director at Gartner, said, "Globally there are established FABs that are struggling to maintain their profitability," adding there was little incentive for chip-makers to come to India.

The semiconductor wafer FABs, when set up, will stimulate the flow of capital and technology, create employment opportunities, help higher value addition in the electronic products manufactured in the country, reduce dependence on imports and lead to innovation, Sibal said.

The proposed FABs are expected to provide direct employment to about 22,000 and indirect employment to about 1,00,000 people.