The Hindu Business Line : Support package is key factor in fab location

Chennai April 15 A few weeks ago, Hindustan Semiconductor Manufacturing Corporation (HSMC) announced its plans for chip-making plants in India. The company spoke of its tie-up with Infineon Technologies of Germany, and a likely investment of $4.5 billion.

The news has generated perceptible interest globally. For instance, www.fabtech.org said, "India could now be on a path that will establish semiconductor front-end fabrication facilities," in an article titled `India close to joining fab club'. Mr Jack Lyne wrote on www.siteselection.com, "HSMC's leaders, a group of Silicon Valley-based expatriate Indians, are openly embracing the role of national economic catalyst."

Mr David Manners observed, on www.electronicsweekly.com, "The Infineon deal in India to help set up `Fab City' seems a much smarter deal all round than the Intel-China deal to set up a PC chip-set fab in China." And an April 4-dated story on www.bloomberg.com noted, citing Mr Verma's answers to a television interview, that the company would select a location for one of the manufacturing sites `within three to four weeks'.

Business Line contacted Mr Devendra Verma, Chairman, HSMC, for quick answers to a few questions.

Is India getting into chip-making too late in the day?

Not really. There was hardly any Indian market. It is never too late.

What are India's strengths that you'd like to leverage in HSMC?

Indian market is growing very fast for cell phone, SIM cards, smart cards, cable and DTH (direct-to-home) box, and automotives. HSMC is focusing on products that have quite fast growth. And there is the Indian market, which can be captured too, which was not there before.

On India's policy on semiconductor industry vis-à-vis other countries.

It is fairly ok. One would have liked to see it close to 35 per cent. Certain support from state governments will also help.

On SCL (Semiconductor Complex Ltd, India) and its role in the industry.

They are not playing any major role in commercial area.

On the immediate priorities before HSMC.

Selection of location and announcement of financial partners.

Does the world already have enough and more fab capacity? If yes, won't it be advantageous and economical for India to source chips rather than make them here?

One could think that way for many items. Look at the manufacturing of cell phone. Suddenly Nokia made over 25 million phone in India. Same type of performance can be repeated in semiconductors. It is predicted that by 2015, India will manufacture about $350 billion electronic goods leading to a demand for billions of semiconductor chips. It is a big market and many foundries can be justified.

What are the key drivers behind the choice of location for a semiconductor facility?

Many parameters; and especially the support package.

Do you see the Nandigram episode as a deterrent for big businesses?

I do not know about the Nandigram episode.