AP, Intellect to ink MoU for $3.1bn fab facility soon

Groundbreaking ceremony likely to be conducted in February 2005

Seoul-based Intellect Inc, which has expressed interest in setting up a $3.1-billion fab facility in Andhra Pradesh, is expected to ink a memorandum of understanding with the state government in the next 15 days.

The facility will come up in two phases with investments of $600 million and $2.5 billion respectively.

Speaking to Business Standard, on the sidelines of the 'India e-Hardware summit-2004', June Min, chairman of Intellect Inc, said, "The groundbreaking ceremony for the facility would be conducted in February next year and the company would be named India Semiconductor Manufacturing Company (ISMC)."

Fab is the short form for fabrication facility "" a silicon wafer manufacturing plant "" or also known as a semiconductor factory. Fabs manufacture semiconductor products like integrated circuit chips or components.

The state government has allotted a total area of 50 acres for the facility at the Hardware Park in Shamshabad, on the outskirts of Hyderabad. Around 14 acres would be used for the first two phases and the rest would be used for future expansion.

Out of the $600-million investment estimated in the first phase, Intellect expects an equity participation of $160 million split between domestic as well as international partners for the first phase of the project.

Min said that out of the $80 million that the company is looking from Indian partners, it has approached the state to seek a $40 million grant from the central government.

According to him, the company is looking at raising the required amount within 90 days of signing the MoU.

"After the required amount is raised, it would take 12 months to build the facility and another six months for the installation of the machinery and for prototyping. So, if all goes well the commercial production would commence by late 2006 or early 2007," Min said.

The second phase construction of the facility, with an investment of $2.5 billion, would begin two years after the first facility is set up.

ISMC would be producing eight-inch refurbished chips in the first phase and in the second 12-inch chips would be manufactured that would cater to the requirements of the consumer electronics sector, the automobile sector, in wireless communication devices and in personal computers. Min said that the Indian semiconductor market is expected to touch $1.2 billion next year and the domestic market would consume around 80 per cent.

The first phase of ISMC is expected to provide employment to 2,500 people. "The production of 3,00,000 wafers a month requires 1,000 employees and around 1,500 employees are expected to provide the support from outside. The outside support would be in terms of maintaining equipment, gases and chemicals," Min said.

After the completion of the second phase, around 10,000 employees would be associated with the industry, Min said.

Initially, the company expects 70 per cent of the production to be consumed by the domestic market and the rest would be exported. "Once the second facility comes up we expect the equation to reverse to 30 per cent for the domestic market and 70 per cent for the export market," Min said.

Min said that West Bengal and Karnataka approached him for setting up the fab facility in those states. "However, we believe that Andhra Pradesh has better conditions and infrastructure and have, therefore, decided to set up the facility here," he said.

According to Min, one fab requires 10,000 tonnes of water and around 35 mega watts of power per day. The fab facility is also expected to provide opportunity for around 250 ancillary industries to come up.