IBM signs pact with Intellect for fab facility

Ground-breaking ceremony on June 26

IBM has entered into an agreement with Korea-based Intellect Inc to take part in the $600-million semiconductor fab manufacturing unit (phase 1) proposed to be set up in Hyderabad.

According to reliable sources, as per the understanding, which is essentially a technology collaboration, entered by June Min, chairman of Intellect Inc and promoter of the fab facility, IBM will have about 24 per cent equity in the project.

Sources said June Min is currently in talks with Tata group for investment in the infrastructure required for the project.

When contacted to know about status of the project including details of the financial closure and the technology collaboration entered with IBM, June Min refused to share any information prior to the ground-breaking ceremony for the proposed project to be held on June 26, 2005.

The fab capacity would be 30,000 wafers per month and the mass production is expected to begin by July 2006.

It may be recalled that in December last, June Min signed an MoU with the Andhra Pradesh government to form a joint venture company for setting up a semiconductor fab manufacturing facility in the state.

Subsequently, he incorporated a company "� NanoTech Silicon India Private Limited "� to produce a range of products including wireless communication chips, PC chips, digital consumer electronic chips, automobile ICs and memories.

State chief minister Y S Rajasekhara Reddy is scheduled to perform the ground-breaking ceremony for the proposed fab facility on Sunday.

The company is proposing to develop a logic semiconductor fab which will have a capacity of 30,000 wafer start per month and will start with 0.35µm (sub micron) 3 and/or 4 metal layers, 10,000 wafer start per month and then extend it to 0.25µm (sub micron) 5 metal layers 20,000 wafer start per month.

Besides the IBM stake, which is estimated to be around $150 million, Intellect Inc is trying to rope in Tatas to invest in the basic infrastructure facilities required for the proposed fab unit.

According to sources close to the development, the talks between June Min and Tata Sons in this regard are at a very advanced stage. Going by the available information, if the ongoing talks result in a positive outcome, Tatas may even have over 40 per cent equity in the project.

According to information, promoters equity, including that of June Min, is expected to go up to $200 million from the originally envisaged $160 million in the proposed project.

June Min, who is said to have personal assets worth over $ 3 billion, is credited with setting up of more than half-a-dozen fab facilities around the world.

Sources also said that the State Bank of India has in-principle agreed to provide $250 million as debt for the project through a lenders' consortium.

Phase 2 of the project with a whopping $2 billion investment is proposed to be taken up in 2008, and is expected to be a very advanced chip manufacturing facility.

The Andhra Pradesh government has offered a loan servicing with an upper limit of Rs 35 crore a year for 10 years to the Phase 1 project besides giving over 50 acres of land at Shamshabad near the international airport on a 30-year lease, free of cost.