Indian Consortiums In Talks With The government To Build Microprocessor Fab Plants

India maybe known as of one the favourable locations for outsourcing, but the government wants to have a homegrown industry for computer hardware.

The government officials hope that it could start this manufacturing business of computer goods by offering certain incentives. Currently the government has a broad definition of ‘locally made PC hardware’ since very few electronics are currently made here. As of now, Dot-matrix printers which is outdated in most parts of the world is one of the few products India manufacturers. According to Manufacturers’ Association for Information Technology, 400,000 dot matrix printers were sold in India by the end of March 31st, which shows 2% increase in comparison to last year. There are many assembly lines for PC and other hardware made by Lenovo and Dell.

Keeping aside the manufacturing of the end products, the country hopes to build a fabrication plant for processors which would as high as $5 Billion to build. There’s also a requirement that Chip makers will need large amount of clean water and reliable energy supply.

Dr. Ajay Kumar, Joint Secretary of the Department and Information Technology said,”If at least 30 percent of a computer’s components are made in India, then it would qualify. The policy also allows prospective suppliers to show “value addition” in lieu of actually manufacturing the goods in India.”

According to few reports, 2 consortiums have been negotiating with the government to build microprocessor foundries, one of them being led by Jaypee Group, one of the largest construction companies which was the one who built the Formula One Track in Uttar Pradesh. The construction company has partnered with IBM. The second consortium is lead by Hindustan Semiconductor Manufacturing Corporation. Despite the name suggest, this is an American based company and does not manufacture chips, but it has partnered with Geneva-based chip maker STMicroelectronics.

Ron Sommers, the president of U.S.- India Business Council doubts that India would be able to provide the infrastructure and resources required for the chip fabrication plans as the country required basic infrastructure required to supply power to keep the lights on. He also pointed out that there have been many failed attempts to set up chip plans in the past.

There are other issues as well. Critics note that if India wants to encourage high-tech manufacturing of processors and good, it will have to reduce some of its barriers to do business. PVG Menon, President of Indian Electronics and Semiconductor Manufacturing Association said that import duty on finished products is cheaper than on components and also pointed out that the end product maybe more expensive due to lack of reliable power and extra time taken to move good due to poor roads in many locations. An anonymous industrial official said,”They flew in their suppliers from China and Taiwan to see if they could set up facilities. They said no. The market is too small, and logistically it is a nightmare.”

But India does have infrastructure of manufacturing and a very successful business model. In the 1980s, India has opened its doors to automotive industry to foreign companies, where Suzuki Motors have bought a stake in Maruti Udhyog in 1982. Currently, India is the 6th largest auto industry in the world because of the eco-system that the government created in the past.

Source: NY Times