No major fab investments for India in 2007, Gartner says
By Chitra Giridhar, Contributing Writer -- EDN, December 12, 2006
Despite the recent hype about India’s being a hot destination for semiconductor manufacturing, global fab majors will stay away from India in 2007, predicts Gartner Group.
“No major investments in fabs are expected in 2007,” predicts Ganesh Ramamoorthy, principal research analyst, Gartner Group.
Instead, Ramamoorthy says, global fab vendors will look at India more aggressively for its design prowess, and he predicts that four to five big semiconductor design deals are likely to be announced in 2007. Fab companies could look at setting up semiconductor assembly and test (SAT) units. Ramamoorthy also says he anticipates that two or three new SAT units will be established next year.
The Economic Times, a financial newspaper in India, recently reported that the Indian government plans to offer a special incentive package to semiconductor fabrication units if the total capital investment is more than $500 million within the first 10 years of a project. This incentive, which is expected to be included in the proposed federal budget next year, might be in the form of direct investment in the project (up to 26 percent equity) or through investment grants, tax credits or interest subsidies. The federal finance minister has also publicly supported a proposal to make India a preferred destination for the manufacture of semiconductors and other high-technology products such as LCDs, plasma displays and storage devices.
V Veerappan, vice president of operations for Tessolve Services, opines that the proposed fiscal incentives would encourage manufacturing companies to come to India. He thinks that the government could consider extending these concessions to activities such as semiconductor packaging as well.
While welcoming the proposed incentives, Balakrishnan Dorairaj, chief operating officer, SPEL Semiconductor, an assembly and test company in Chennai, suggests, “It would be good if the government could provide support through soft loans.” Shan Ponnambalam, director-operations for Applied Materials India, concurs and says, “This incentive is attractive and will benefit companies such as ours.”
Bob Kondamoori, managing partner, Sandalwood Partners and one of the key investors in SemIndia, is more circumspect. “We have decided to wait until the government announces a firm package outlining incentives for fabs before commencing the second phase of our project (constructing) the actual unit that will manufacture semiconductor wafers],” he says.
SemIndia is proposing to set up a $3 billion project that will manufacture semiconductor wafer chips, using technology from Advanced Micro Devices.
Raj Khare, chairman of the India Semiconductor Association, says he is optimistic that a favorable semiconductor policy could ignite heightened manufacturing activities in the country.
According to Ramamoorthy, global electronic component suppliers will look at India more intently when their clients start putting up manufacturing bases in India. He anticipates that mobile phones and flat-screen TVs will be the main drivers of semiconductor consumption through 2007 in India. Suresh Kamath, general manager for component distributor Avnet India, concurs, pointing to 30 percent growth in local component consumption, driven largely by contract manufacturers. He predicts that cell-phone-related components such as DSPs and memories will do well.
Although the booming local market and the semiconductor policy may lure manufacturers to set themselves up in India, many are still keenly aware that the country still has to deal with infrastructure limitations.
