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Global Reach
A long-awaited package of government reforms and incentives to encourage development of fab
foundries, unveiled in February 2007, was intended to attract some $10 billion in new investment
for as many as three new wafer facilities, plus ancillary manufacture of displays, storage devices,
photovoltaic cells, nanotech, assembly/testing, and so on. Under the new policy, special
incentives will be offered for minimum investments of (a) $625 million for a fab plant with a
threshold value of $2.5 billion, or (b) $250 million for an ancillary project with a threshold $1
billion value. The government will cover 20% of capital expenditures for the first 10 years if a
facility is located in a special economic zone (SEZ), or 25% if it is not. The new rules waive
countervailing duties on capital goods for plants outside the SEZs, as they are already waived for
those in the zones.
Skepticism remains: with a delay of more than two years in rolling out the semiconductor policy,
Texas Instruments ruled out a planned fab facility in April 2007, and Intel opted in September
2007 to site new fab operations in China and Vietnam instead of India. As of August 2009,
India’s Department of Information Technology (DIT) had received 17 formal proposals in
response to the new policy. Of these, 15 are for photovoltaic panel manufacture by companies
such as Moser Baer India, Titan Energy Systems, and KSK Power Ventures, and the other two
are a Reliance Industries fab project and Videocon LCD panel facility.
Two NRI partnerships that include tech leaders and academics from Silicon Valley,
Semindia, and Hindustan Semiconductor Manufacturing Corp. (HSMC), had
expressed an interest in developing fab projects in the $2–3 billion range. But progress
has been slow in fundraising, and questions have arisen as to whether current government
incentives are sufficient for projects of that scale to pencil out.
Semindia, led by Dr. Vinod K. Agarwal—founder of San Jose-based embedded semiconductor test
software LogicVision—joined with Advanced Micro Devices (AMD), Flextronics, Broadcom and
venture firm Sandalwood Partners as the anchor tenant in Fab City, a 1,050-acre chip industry
technology park near Hyderabad, launched in February 2006 by the government of Andhra Pradesh.
The partnership broke up in mid-2008, however, and Semindia announced in February 2009 that it
would shelve its fab plans in favor of an ATMP facility.
Semindia has been offered 100 acres on an 88-year lease for 1 rupee per acre per year, with subsidized
water and power, and full or partial reimbursement of value added taxes on product sales for
15 years. So far, the consortium has committed to a $1 billion Phase I investment in a 25-acre ATMP
facility employing 2,000 workers and producing 30,000 wafers a month. Political opposition, plus
delays in transferring land and finalizing water and electricity pricing, have held up the project.
HSMC—whose partners include Redwood Ventures founder Rajvir Singh, Stanford professor
Krishna Saraswat, former Bell Laboratories director Dr. C. Kumar Patel, and former Sun
Microsystems senior executives Raj Parekh and Anant Agarwal—is also negotiating a 100-acre
site within Fab City. Nano Tech Silicon India (NTSI), a South Korean venture, had broken
ground on the site of a new airport at Shamsabad, outside Hyderabad, in 2005. At various times,
NTSI was said to be partnering with IBM, Intel and Samsung, to make chips for consumer elec-
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