Setting up semiconductor fab to cut import bill

The government’s decision of setting up Rs 51,550-crore semiconductor fabrication plants will help India cut its ever-ballooning import bill from $491.48 billion in 2012-13 and pave the way for domestic manufacturing of electronic products.

A semiconductor fabrication plant (fab) is a factory where devices such as integrated circuits are manufactured and right most of them are based in China and Taiwan where the electronics ecosystem is immensely mature.

India,at present, consumes close to $7 billion of semiconductor products every year. By 2020, when the total ESDM market is expected to reach $400 billion, this consumption is expected to rise to touch $55 billion. Experts believe that with the location of a fab in India, the country could achieve a degree of self-sufficiency in electronics.

The Cabinet on Thursday accepted two offers that have come up to set up semiconductor plants; by two consortium led by Israel's Tower Semiconductor (TSEM) and Franco-Italian STMicroelectronics (STM).

Tower Semiconductor has partnered with International Business Machines and Jaypee Associates, STM has partnership with Hindustan Semiconductor Manufacturing for the fab.
“It was expected that some day it would be cleared and was part of the recommendations of the committee that I had chaired,” HCL Founder Ajai Chowdhry told Deccan Herald.

Setting up a fab would also benefit design companies in Bangalore as these companies, who now have to send their designs abroad for manufacturing can now get it done in India.

“Semiconductors form a large part f the electronic industry. Even cars nowadays have more than 100 microprocessors to perform specific functions,” Chowdhry added.

The India Electronics & Semiconductor Association (IESA) lauded the announcement and said that some of the world’s leading economies including the USA, France, Germany, Ireland, Japan, Singapore, Taiwan and China besides a number of developing economies like Malaysia and Israel have their own fabs.

“These fabs continue to contribute significantly to the growth and development of the economy of their respective countries and we hope that this would be the case in India as well.” The Cabinet has also said that incentives which will be given to the two proposals will be offered to other interested players.

“Setting up of such a high value manufacturing industry as semiconductor chip fabrication will have truly transformative effect, on the overall electronics industry. Manufacturing in India will soon witness a new frontier,” Applied Materials India President & Managing Director Aninda Moitra said.

However Mro-Tek Vice-President (Tech) sounded cautious as he said that this step should have been taken long back since companies had to send their design to other countries for manufacturing.