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Thu, Nov 04, 2004 - Page 12 News List

India of two minds on the question of microchips

PERENNIAL DEBATE Key semiconductor industry figures disagreed over whether a fabrication plant will improve the country's presence in the industry

AFP , BANGALORE, INDIA

More than a decade after Taiwan took the lead in microchip manufacturing, India's nascent semiconductor industry is still debating whether it should be in the chipmaking business at all.

Industry leaders this week again came together to engage in what has become an almost annual debate -- will a fabrication plant in India help the sector or not?

"As far as a fabrication plant is concerned I have my own doubts," said J.A. Chowdary, president and chief executive of Pinexe Systems, a semiconductor firm.

"No government is interested in investing a huge amount in such a facility. There is no hope here. But as far as electronic components are concerned there is an opportunity," Chowdary told delegates at Tuesday's conference in Bangalore.

He said India should focus its energies on contract manufacturing for the electronics industry which, according to industry analysts, is projected to earn revenues of US$9.7 billion next year.

India holds a meager 0.1 percent of the global semiconductor industry worth US$300 billion. In comparison, Taiwan's share of the industry grew from US$440 million in 1990 to US$16 billion in 2000.

Taiwan produces about 80 percent of global semiconductor chips and boasts the world's leading made-to-order microchip maker, Taiwan Semiconductor Manufacturing Co, founded in 1987.

The company makes about 4.3 million wafers annually and for the nine months to September its net profit rose to US$70.13 billion from US$31.26 billion in the same period the previous year.

Rajat Gupta, chief of Beceem Communications, a chip-designing firm, argued India must not give up its dream of having a foundry.

"I do not see any reason why we do not have one," Gupta said. "One has to innovate to raise funds for this. We have got to believe that we can do it. The mindset has to change."

Raja Manickam, chief executive officer of Tessolve, which provides services for semiconductor testing and hardware design, said about 125 firms in India are doing semiconductor work ranging from electronic design automation and testing to developing software.

More than 70 of these are based in the technology hub of Bangalore.

"Anything to do with intensive engineering should be ours," Manickam said. "The semiconductor manufacturing industry is worth US$240 billion and a fabrication plant in India will unlock the entire semiconductor supply chain.

"We have the talent and we need to pitch this with a lot of investors in the United States," he said.

But Bobby Mitra, managing director of Texas Instruments, disagreed.

"India's infrastructure does not allow production of chips," Mitra said. "India is also not doing too well in terms of chip design as there is talent but not too much experience."

A week ago, 31 local and foreign companies launched the India Semiconductor Association to raise the global profile of India's sector.

Siddhartha Das, strategic initiative director of Intel Capital, based in Bangalore, said India was losing its focus in the semiconductor industry as it was "jack of all trades and master of none."

"The payoff will only come when there is a certain level of investment and risk. In India our minds are torn between software and hardware. There is a dichotomy. True success comes from both," he said.

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