The Indian government has approved proposals for setting up two semiconductor wafer fabrication manufacturing facilities in the country. These FAB facilities are expected to boost electronics system design and manufacturing eco-system in India. The semiconductor market has immense potential in India, experts say.

In 2011, the government had constituted an empowered committee to identify technology and investors and recommend incentives for establishing two FAB facilities. Accordingly, the committee invited global EOI for this project. The government cleared the project after the committee submitted its recommendations in March 2013.

The details of the two FAB facilities proposed to be set up are as under:

  • Jaiprakash Associates, along with IBM of USA and Tower Jazz of Israel, is planning to establish a FAB facility, possibly in Greater Noida, Uttar Pradesh, at an estimated cost of Rs.26,300 crore.
  • Hindustan Semiconductor Manufacturing Corporation, along with ST Microelectronics of France/Italy and Silterra of Malaysia, has proposed a fabrication facility at Gandhinagar, Gujarat, at a cost of around Rs.25,250 crore.

Both the FAB facilities would manufacture 40,000 wafer starts of 300mm size per month using advanced CMOS technology. Technology nodes proposed are 90, 65 & 45 nm nodes in phase-I and 28 nm nodes in phase-II with the option of establishing a 22 nm node in phase-III.

The government has also approved a package of incentives for the two consortia. This 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, the FAB facilities will also be eligible for investment linked deduction under Section 35AD of the IT Act. The government will provide viability gap funding in the form of an interest free loan for a period of 10 years.

However, the details of the incentives will be worked out based on appraisal of the detailed project reports to be submitted by the two consortia within two months.

The technology providers have to take an equity stake of at least 10 per cent in the proposed projects. The government will also pick up 11 per cent equity in the projects.

The FAB facilities would help promote electronics system design and manufacturing in the country. On completion, the semiconductor wafer fabrication facilities would stimulate the flow of capital and technology, create employment opportunities, result in higher value addition in electronics products manufactured in India, reduce dependence on imports and lead to innovation, Minister of Communications and Information Technology Kapil Sibal said.

The two projects are expected to create direct employment for about 22,000 people and indirect employment for about one lakh people.

TowerJazz, the global speciality foundry leader which is teaming up with Jaiprakash Associates and IBM for one of the projects, is bullish on India.

As CEO Russell Ellwanger has said, “With regard to further expanding capacity, we remain very excited about our business opportunity in India. As previously announced, we are engaged with a strong consortium and have submitted a bid to the government to build and operate a 300mm wafer facility. This initiative enables us to develop a long-term roadmap towards the 300mm wafer size, 90nm analog technology and companion chips in deep submicron technologies and it will also give us a major revenue stream during the portion of FAB build out and FAB operation.”

TowerJazz envisions the Indian semiconductor market to be among the highest growth potential markets in the world. The Israeli company has estimated that the Indian market will be worth hundreds of billions of dollars by 2020.

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