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India’s ambitious chip manufacturing plan falters, fails to materialize potential investors

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India’s ambitious plan to become a major chip manufacturer has received a setback as potential investors spurn plant funding . The project was launched to take on the likes of China and produce chips for new-generation smartphones locally.

Over three years ago, the government had boldly announced that it would host two new $5 billion chip plants to become a global player in chip manufacturing. The projects aim was to create thousand of jobs, reduce the need for imports and also take on global rivals, such as Taiwan Semiconductor Manufacturing and GlobalFoundries.

But according to analysts, India’s wobbly infrastructure, unstable power supply, poor planning skills and bureaucratic red tape has put off potential investors.

A top official at the Department of Electronics and Information Technology (DEITY) has told Reuters that,

We’ve had a lot of issues with the original plan. The technology curve has moved ahead in the last three years. The global environment has changed and China has emerged as a big player.

Jaypee Infratech, was partnering with IBM Corp and Israel’s Tower Jazz was the first one to abandon ship. But, STMicroelectronics NV has also followed pursuit and scrapped plans to setup the second $5 billion plant. The company says that its local partners failed to raise enough money from potential investors.

In addition to these two, a consortium led by Indian startup Hindustan Semiconductor Manufacturing Co (HSMC) with STMicro and Malaysia’s Silterra might also be scrapping its idea to setup chip plant.

Deven Verma, founder of HSMC, said that the consortium only had 40% of the required funding and operations were scheduled to start in a year. He also added that,

Our original estimates for chip demand were incorrect and we decided to postpone our plant until 2020 since there’s no market for semiconductors in India yet.

The officials say that their over-ambitious plan to setup a 22 nanometer chip fabrication plant was doubted by potential investors. They believed that industry’s cutting-edge technology had already shifted to smaller 14 nm chips. It is expected to move to sub 10 nm in the next three years.

So following the industries lead, we are also toning down our ambitions and want to tackle the low-end chip making, said a government official.

LET’S MAKE LOW-END CHIPS INSTEAD!

DEITY now plans to attract low-tech component companies to the country, including PCB, integrated circuits and analog chip makers.

If we target manufacturers of electronic components to look at India for their global production, we can start by manufacturing components such as PCBs and ICs locally, and that will give a much-needed boost to manufacturing in India,

said two government officials in a statement.

The government has started poaching foreign manufacturers including Apple Inc. to setup a manufacturing plant in India. But, the country would also need to bump up its component making abilities to attract investors.

Ganesh Ramamoorthy, an analyst at research firm Gartner believes that it is crazy to think that India whose electronics industry is in shambles can compete with China. And that too in a vertical like chip manufacturing.

This ambitious project falls under PM’s Modi’s ‘Make In India’ programme. He has already attracted some Chinese smartphone manufacturers like Xiaomi and LeEco to setup assembly plants in India. The plan is to cut net electronic import from $40 billion last year to zero by 2020.


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