 "Jaypee, HSMC find life is not so fab")
Two years earlier, the government had given in-principle approval for two proposals to set up units and was ready to subsidise as much as 40 per cent of the project cost. But both groups — one led by Jaiprakash Associates (Jaypee) and the other by Hindustan Semiconductor Manufacturing Corporation (HSMC) — are finding it difficult to tie-up the funding.
According to the government’s terms, both had to show proof of funding before their applications could get final approval. It has given them a final deadline of June 30, having waited for over a year, said a government official.
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Manufacturing of chips is central to the country’s need to make electronics locally.
According to a report in The Economic Times, Modi's agenda includes meetings with Samsung Electronics' president J K Shin and LG Electronics’ global vice-chairman, Bon-Joon Koo. The report quotes communications and information technology minister Ravi Shankar Prasad as saying, "Only when a semiconductor facility is set up will it usher a complete revolution in cellphone manufacturing in India, since a cellphone or electronic product can then be manufactured from the component level. In the current scenario, models and components are mostly imported in completely knocked-down format and then assembled here."
Samsung is one of the world's largest semiconductor producing companies. LG is trying to revive its semiconductor business.
Here, though, despite the government’s support, investors are not so keen to back the existing proposals.
The official quoted earlier said it was public knowledge that the Jaypee group was in financial stress and HSMC, too, was having a problem in getting investors, added the official. The companies have to show funding of 10 per cent of the proposed equity for the first phase, which is Rs 300-400 crore. “Investors will commit 10 per cent only when they are convinced of the other 90 per cent; otherwise, even the 10 per cent will go waste,” said the official.
Jaypee did not respond to an email seeking comment. HSMC could not be reached.
In the original plan, Jaypee had proposed a facility in Greater Noida with an investment of Rs 26,300 crore, with IBM and Tower Jazz as partners. HSMC has partnered ST Microelectronics and Silterra; it has planned a unit at Prantij near Gandhinagar in Gujarat, with an investment of Rs 25,250 crore.
India imports a majority of its electronics because chips aren't made locally. The government expects India to import electronic goods worth almost $300 bn, of its total demand of $400 bn, by 2020. India's electronics import bill could, thus, exceed that of oil. Local fabrication (fabs) will reduce import, stimulate investment in the economy and create jobs.
The government had invited the proposal for semiconductor fabs in June 2011. That is when the two consortiums had made bids. A lot has changed in these four years since the first project designs were given by these companies. For instance, late last year, IBM, technology partner for Jaypee, sold its semiconductor operations to Globalfoundries.
Vendors were mandated to produce chips of nodes 90, 65 and 45 nanometre (nm), which go into industrial devices such as medical equipment and low-end handsets. Chips that go into high-end products -- 28 nm and 22 nm -- will come only in the second phase. “But, we had factored in even for 20 nm, expected to be used between 2020 and 2025,” said the official, emphasising that the delay will not make the project outdated.
India has had a chequered past on the dream of setting up electronic fabs. In 2007, talks with Intel Corp to set up a facility in India collapsed at an advanced stage. The government soon after unveiled a new semiconductor policy, which also failed to garner interest. In 2011, when it invited fresh proposals, it did not receive a single proposal from any global chip manufacturing company. Only Jaypee and HSMC had bid. In 2013, the government again invited more proposals but failed.
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