Analysts skeptical of chip fab in India
Global IT analyst Gartner Dataquest has cast doubts on whether it makes rational business sense for setting up a chip fabrication plant in India. The government, on the other hand, is planning to provide a flat 32% fiscal benefit to chip fabs loca...
By Harsimran Singh, TNN |
HYDERABAD: Global IT analyst Gartner Dataquest has cast doubts on whether it makes rational business sense for setting up a chip fabrication plant in India. The government, on the other hand, is planning to provide a flat 32% fiscal benefit to chip fabs located in domestic tariff areas (DTAs).
Speaking at the Indian Semiconductor Association���s Vision Summit 2007 on Monday, Bryan Lewis, research vice-president and chief analyst (semiconductor), Gartner Dataquest said, ���We have a team of 15 analysts studying chip fabs globally. There will be overcapacity and saturation in the market by 2009, by which SemIndia plans to set up its chip fab. Moreover, there won���t be enough local demand to match the production capacity.���
SemIndia, the company setting up a $3-billion chip fab at Hyderabad, however, squashed Gartner claims. SemIndia CEO Vinod K Aggarwal said, ���There will be enough local demand. People make these claims coming from countries which are growing at 3-4%. India���s GDP is growing at over 8% which would generate enough local demand like what happened in the case of telecom sector. We have our order books full as of now.���
SemIndia has commitments from AMD, Sandisk, Flextronics and Broadcom. ���AMD will take a stake in the venture once the policy is announced,��� Mr Agarwal said. Reportedly, Nokia, Qualcomm, Cisco, IBM, ST Microelectronics are also planning to source chips from SemIndia. Lewis, however, thinks otherwise. ���The government should first announce its policy incentives. China excelled in manufacturing because of government support.���
Jasvinder Ahuja, MD of Cadence Design Systems said, ���As a consumer, I would like the chip to be priced at the lowest, regardless of the fact whether it���s manufactured in India or China. But India will need a fab to maintain an edge in global-competitiveness.���
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The government is considering two models for financing chip fabs. The DTAs may be given a flat 32% fiscal benefit which would not include any tax benefit. For units located inside SEZs, the government may provide a 22% financial support for the entire project cost in the form of grants, equity and interest subsidy apart from SEZ benefits. The government may announce the policy post February 18. SemIndia however, may go with the DTA model as tax incentives would not mean anything for it since a fab starts turning cash positive only after two-three years.
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