Government to play active role in making India a global semiconductor hub

Source: The Economic Times, Feb 21, 2017

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 Rs 51,000 crore.

Admitting that the government’s earlier approach of inviting 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, dilutes 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.Chip-level manufacturing is core to Prime Minister Narendra Modi’s ambitious Make in India programme that may attract big-ticket investment with the entire ecosystem including design and research & development, and potential job opportunities. 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 billion 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, dditional secretary Ajay Kumar said.

He added that the department is closely working with the sole consortium led by HSMC, which is still trying hard.

The government has given all the requisite clearances to the HSMC-led 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. “An incubator has been set up with financial support from the MeitY at IIT Hyderabad to promote fabless chip design industry in the country,” Kumar said.

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