MUMBAI India's ambitious plan to be a major player in semiconductors, taking on the Chinese and churning out locally-made chips for a new generation of smartphone users, has proved to be a little too ambitious.
The government boldly announced three years ago it would host two new $5 billion chip plants as part of a project to become a global manufacturing powerhouse, creating thousands of jobs, reducing its need for imports and taking on global rivals such as Taiwan Semiconductor Manufacturing and GlobalFoundries.
But potential investors have not materialized, put off by India's wobbly infrastructure, unstable power supply, bureaucratic red tape and poor planning, according to analysts and industry insiders.
Just weeks after Jaypee Infratech, which was partnering IBM Corp and Israel's Tower Jazz, abandoned plans for one of the big chip plants, STMicroelectronics NV is set to scrap plans to build the other $5 billion plant as its main local partner failed to raise enough money from skeptical investors, government officials said.
"We've had a lot of issues with the original (semiconductor) plan," a top official at India's Department of Electronics and Information Technology (DEITY) told Reuters. "The technology curve has moved ahead in the last three years, the global environment has changed and China has emerged as a big player."
Two other officials at the department said a consortium led by Indian start-up Hindustan Semiconductor Manufacturing Co (HSMC) with STMicro and Malaysia's Silterra had not been able to raise the funding for the plant, and it might be scrapped.
Investors doubted the potential of the Indian government's plan to set up a 22 nanometer (nm) chip fabricator as the industry's cutting-edge manufacturing has already shifted to smaller 14 nm chips, and is expected to move to sub-10 nm in the next three years, the officials said.
"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," HSMC founder Deven Verma told Reuters.
Verma said the consortium had not yet closed financing for the plant, but had commitments for only 40 percent of the required funding. Operations had been expected to start this year.
STMicro declined to comment.
India is now toning down its ambitions and setting its sights on low-end chip making, the government officials said.
DEITY plans to attract low-tech component companies including makers of printed circuit boards (PCBs), integrated circuits and analog chips.
"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 one of the two top government officials.
To that end, the government has courted foreign manufacturers including Apple Inc to set up plants in India, though analysts say the country needs first to bulk up its component making capabilities.
"It's crazy if India thinks it can compete with China on something like chip manufacturing when our electronics industry is a shambles," said Ganesh Ramamoorthy, an analyst at research firm Gartner.
India's ambitions in electronics manufacturing include cutting net imports to zero by 2020, from about $40 billion last year. It is the world's fastest growing smartphone market with over 100 million sold last year - but almost all of those phones' chips and circuits are imported.
Prime Minister Narendra Modi has attracted some phone makers, including Chinese smartphone maker Xiaomi, to set up assembly plants in India. Samsung Electronics also manufactures some smartphones locally.
(Reporting by Himank Sharma; Additional reporting by Mathieu Rosemain in PARIS; Editing by Miyoung Kim and Ian Geoghegan)
This story has not been edited by Firstpost staff and is generated by auto-feed.
First Published On : Jun 15, 2016 14:46 IST