Govt Aims to Make In­dia a Global Semi­con­duc­tor Hub

May con­sider mak­ing ini­tial in­vest­ments to at­tract pri­vate cos

The Economic Times - - Economy: Macro, Micro & More -

Mun­tazir Ab­bas & Gul­veen Au­lakh

New Delhi: The min­istry of elec­tron­ics and in­for­ma­tion tech­nol­ogy (MeitY) is re­vis­ing its pol­icy frame­work to­wards mak­ing In­dia a global semi­con­duc­tor hub, which will see the gov­ern­ment tak­ing a more ac­tive role, in­clud­ing ini­tial in­vest­ment, in a bid to at­tract pri­vate sec­tor play­ers.

The ex­ist­ing pol­icy has not worked as it of­fered lit­tle com­mer­cial vi­a­bil­ity for the pri­vate sec­tor. Ear­lier, a Jaypee-led con­sor­tium pulled out mid­way from a project for set­ting up of a semi­con­duc­tor wafer fab­ri­ca­tion man­u­fac­tur­ing fa­cil­ity.

Re­cently, an­other con­sor­tium, led by Hin­dus­tan Semi­con­duc­tor Man­u­fac­tur­ing Cor­po­ra­tion (HSMC) in­clud­ing ST Mi­cro­elec­tron­ics and Sil­terra Malaysia, which had also re­ceived ap­proval to set up a fab unit, has been fac­ing chal­lenges in ty­ing up the fund­ing. The two projects were worth ₹ 51,000 crore.

Ad­mit­ting that the gov­ern­ment’s ear­lier ap­proach of invi- ting two pri­vate par­ties for the project — in which it was ready to sub­sidise as much as 40% of the project cost — had not worked, Meity Sec­re­tary Aruna Sun­dara­jan told ET that the new ap­proach will be more broad and have the gov­ern­ment tak­ing “a strate­gic and cen­tral role”.

“In­stead of just invit­ing the pri­vate sec­tor, we are look­ing very closely at an ap­proach where gov­ern­ment makes a strate­gic in­vest­ment (com­plete ini­tial fund­ing), and then at a suitable point in time, di­lute eq­uity to bring in pri­vate sec­tor part­ners,” Sun­darara­jan said. While al­low­ing al­ter­ations to make the pol­icy more com­pelling to in­vestors, the gov­ern­ment may also “look at over­seas ac­qui­si­tion of as­sets”, she added, with­out spec­i­fy­ing.

Re­search firm Frost & Sullivan es­ti­mates that In­dia’s semi­con­duc­tor de­mand would bring eco­nomic op­por­tu­nity worth $50 bil­lion by 2020 across seg­ments that in­clude $30.3 bil- lion from tele­com prod­ucts and equip­ment alone. The elec­tronic chipset ac­counts for a ma­jor cost of mo­bile phones and other elec­tronic de­vices.

But there has been lit­tle com­mer­cial vi­a­bil­ity for multi­na­tional firms to set up units in In­dia, ad­di­tional sec­re­tary Ajay Ku­mar said. He added that the de­part­ment is closely work­ing with the sole con­sor­tium led by HSMC. The gov­ern­ment has given all the req­ui­site clear­ances to the HSMCled con­sor­tium and the group is now mo­bil­is­ing its re­sources and get­ting in­vestors.

In 2016, the con­sor­tium was given more time to sub­mit doc­u­ments for set­ting up the fa­cil­ity.

Since the gov­ern­ment be­lieves that hav­ing its own ecosys­tem is im­por­tant enough, it is look­ing at build­ing the lo­cal ca­pa­bil­i­ties in some ar­eas like gal­lium ni­trate-based fabs. The gov­ern­ment is also con­sid­er­ing pro­mot­ing some of the more promis­ing ap­proaches that have come from In­dian In­sti­tute of Science, along with a con­sor­tia.

In Jan­uary 2015, the gov­ern­ment re­con­sti­tuted an em­pow­ered com­mit­tee (EC) un­der the chair­man­ship of NITI Aayog mem­ber VK Saraswat to set up fab projects. The EC is work­ing to­wards stim­u­lat­ing the fab seg­ment, which is cap­i­tal in­ten­sive with niche tech­nol­ogy ex­per­tise, avail­able with only a limited num­ber of play­ers world­wide.

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