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India should resist wafer fab subsidies

Posted: 07 Feb 2007 ?? ?Print Version ?Bookmark and Share

Keywords:semiconductor? design services? fab? wafer? 65nm?

While India is eager to make its mark as a semiconductor manufacturer, a rapid plunge into leading-edge chip manufacturing could contribute to global overcapacity and not serve India well, according to an analyst attending the India Semiconductor Association's (ISA) Vision Summit conference in Hyderabad.

Nonetheless, fueled by ambition to become the next Silicon Valley, the Indian government said it plans to announce details of a package of financial incentives for the semiconductor industry, "in one or two weeks," according to the chief minister of the state of Andhra Pradesh, Y S Rajasekhara Reddy.

The incentives are expected to include outright cash grants to induce companies such as Intel Corp. and Advanced Micro Devices Inc. to build state-of-the-art semiconductor facilities in Hyderabad's proposed "Fab City" zone. Reddy said it is India's vision and ambition to establish "self sufficiency in semiconductors" before the end of the decade. Currently all integrated circuits fueling India's booming electronics equipment manufacturing market are imported.

But analysts remain skeptical about this emerging nation's ability to develop and sustain a state-of-the-art facility anytime soon.

"I don't think they are ready to go straight to a state-of-the-art fab," Bryan Lewis, research vice president and chief analyst for semiconductor ASIC/SOC/FPGA said in an interview with EE Times. "It's a question of timing. My advice is that they would be better off going to 0.18 or 0.13 [micron]," and not directly to 90- or 65nm, Lewis said, adding the prediction that semiconductor manufacturing overcapacity was coming, and there's plenty of manufacturing capacity that can be purchased elsewhere.

Instead, Lewis advised, "I'd like to see them develop their system design and system-on-chip design capabilities. In the end, when they (the national and regional government) see the true cost and the full economic picture [of manufacturing subsidy] I think they will end up being cautious and taking a go-slow approach."

Despite this, there seems to be a surge of optimism in this region, and a surge of momentum to charge forward and establish a position as a world-leader in semiconductor manufacturing.

Earlier this year the Prime Minister of India signed an "agreement in principle" outlining a series of national initiatives targeting inward semiconductor industry investment in a package approved by Indias Union Cabinet that, in principle, would provide special financing for investments.

Several semiconductor projects await final approval of the Cabinet's program as well as those of other local incentives programs. Among them is the $3 billion Semindia "Fab City" project in Hyderabad for 200- and 300mm wafer fabrication facilities based on technology from AMD. Intel is also said to be negotiating with regional officials to build an advanced testing and manufacturing unit in India and is reportedly awaiting final approval of the governments semiconductor initiative. Several Taiwanese companies are also said to be interested in setting up manufacturing bases in India.

Several initiatives on the national political and economic fronts that emerged late last year aim to create a complete industry "ecosystem" capable of attracting and sustaining new investments in chip making.

"It is the right time for India to showcase its capabilities and draw global attention to the potential of this market. At ISA our goal is to have India become a global brand in the electronics and semiconductor industry driven by technology and quality products," said Poornima Shenoy, president of the ISA trade group.

According to ISA estimates, the Indian market for electronic products is set to reach $363 billion by 2015, growing at a CAGR of nearly 30 percent. But despite recent rapid growth, India's semiconductor market still constitutes only just over 1 percent of the global total.

India is, however, a powerhouse in outsourced software writing, especially in the area of embedded systems. The country's electronics design industry had a turnover of $3.2 billion in 2005 and is expected to grow to $43 billion by 2015, also growing at a CAGR of 30 percent. Of India's total electronic design business, VLSI chip design accounts for 18 percent, circuit board design 4 percent, and the other 78 percent goes for embedded software design.

- Richard Wallace
EE Times

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