September 22, 2005

Will Fab Become The Fad In India?

I don't think so. Not anytime in the near future. Just look at the recommendations. The government can't provide the damn infrastructure for bangalore, you think they'll provide power, roads, airports and Capital(!?) for fab ventures? Keep this as a record.
Not merely complex, semiconductor manufacturing is also one of the most expensive. A silicon chip on an average might sell for under Rs 450, but the manufacturing plant can cost a whopping Rs 14,000 crore and take three years and huge human talent to make it workable and viable.
Since any new industry that is capital intensive takes time to convince investors ? especially in a challenging market like India ? the government can play a very significant role in assuaging investor fears. Further, these multiple attempts will create an awareness among potential investors and fine-tuning of business models necessary to create financiallyviable enterprises. India is on the verge of becoming a player in the large-scale semiconductor manufacturing.



Government should immediately establish a high-level
task force comprising private and public industry experts to create a
blue-print for a Fabcity and drive it forward. The Fabcity will be a single-stop site for semiconductor or electronics manufacturing in India. Unlike the software industry, Fabcity will need to go beyond the traditional infrastructure of roads and land. It will need hundreds of megawatts of uninterrupted and glitch-free power; tens of millions of gallons of water a day; speedy customs clearance and transportation by air from the site in less than two hours; a complete ecosystem for supply of other materials like different types of gases and chemicals; and manufacturing of pure silicon wafers.


Both central and state governments should provide
at least Rs 10,000 crore to this task force to attract
global players to Fabcity. The investment might seem huge but the return on it will be high too if it helps create the Rs 450,000 crore industry. These financial incentives should be included in a single-stop licence scheme for semiconductor manufacturing.


The task force should also be mandated to come up with a Semiconductor Policy that will provide a set of tax and other tariff structures to promote semiconductor manufacturing in India.


Government should help create a system to promote local entrepreneurship by establishing and supporting seed
funding and venture capital funding.

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