A 'fab' is fab

India seems to have moved an inch closer towards becoming a preferred manufacturing centre, with Intel CEO Craig Barrett affirming that the country figures in his company's list of possible locations for its next manufacturing facility.

Hitherto, Intel had steadfastly denied plans to start manufacturing in India. Last week, the Andhra Pradesh chief minister had asserted that a Korean chip maker had already taken the decision to locate a chip making plant in his state.

Perhaps Intel feels it cannot afford to be left behind. A semiconductor fabrication plant is the ultimate destination in IT hardware manufacturing, requiring substantial investment, plenty of clean water and quality power, good infrastructure and easy customs procedures.

An economy passes a benchmark when it is able to provide all this and host a 'fab'.

There is excess capacity globally in chip making. So, even if Intel decides to strike root in India, the actual investment will take time to materialise.

But a favourable decision by Intel would be an endorsement of, among other things, changes in the country's customs procedures. Currently, consignments for hardware manufacturers are being cleared within the day.

Power and water availability are not ideal but large captive users are better able to tie up things to their satisfaction. Even more importantly, chip makers see huge demand for semiconductors emerging in the Indian economy and want capacity in place to meet that demand.

This demand is likely to result not just from accelerated growth, but also because important sections of the Indian economy have woken up to the need to be IT-enabled.

Medium and small businesses are also going in for a modicum of IT spend and leading enterprise solutions providers are busy offering packages to suit their budgets. The central and state governments are busy finalising large IT installation programmes.

Besides, the appetite of the Indian middle class for more and better consumer electronic goods keeps growing. All this translates into a hefty rise in the demand for chips.

As India missed out on IT hardware manufacturing opportunities, a somewhat self-serving argument emerged that the inability to host manufacturing enterprises is no great loss.

The importance of software goes up by the day, and Indian proficiency in it enables it to capture a growing share of the IT spend. Mr Barrett has himself underlined the importance of software and acknowledged Indian capabilities by pointing to the growing hardware design activity in Bangalore.

But no matter how important software is and how great the Indian proficiency in it, there is a loss in not being able to master the business of competitive manufacturing.

Azim Premji, whose Wipro was into hardware before it excelled in software, has led the call for India making up lost ground in hardware manufacturing.

An entire ecosystem of firms and capabilities grows up around a fab, adding to the localised capability to handle most complex manufacturing processes.