Accenture to Review IC Fab Proposals for India

Will India succeed in its quest to create the next Silicon Valley? The government is convinced it has a good chance of attracting semiconductor companies to help accelerate the creation of a local chip industry. And it has signed up the research and consulting firm {complink 21|Accenture} to help set up the terms and conditions for proposals it is soliciting from investors and semiconductor manufacturers.

Accenture said it agreed to a request from India's Department of Electronics and Information Technology to examine “proposals from global technology providers and investors interested in building semiconductor fabrication units” in the country. The high-tech consulting firm is expected to develop the template for business proposals and suggest the terms and conditions that would govern the relationship between the interested parties and the Indian government.

“With an investment scope of billions of U.S. dollars, this strategic project holds considerable promise for Indian manufacturing,” Krishna Giri, managing partner/director for Accenture's health and public services business in India, said in a press release. “By bringing together investors, manufacturers and the government of India, this initiative will help build the critical collaboration that is needed to bridge the gap in domestic semiconductor production.”

The Indian government has made the creation of a local semiconductor manufacturing operation one of the cornerstones of its plan for technology industry development and economic growth. With demand for high-tech equipment and services exploding in the country, the government says it can create jobs and foster growth by encouraging investors to establish chip manufacturing plants there. It has said Indian demand for semiconductors could be as high as $400 billion in the next eight years, but the local market would be able to satisfy only about one-quarter of that demand.

Many chip vendors have branches in India. Few have been looking at setting up fabrication plants in the country. The cost of setting up semiconductor plants can be extremely high — between $3 billion and $4 billion for next-generation fabs. And the number of chipmakers that own and run their own fabs has declined in recent years as many companies have outsourced wafer production to foundries like {complink 5388|Taiwan Semiconductor Manufacturing Co. (TSMC)} to reduce cost.

India has been highly successful in winning IT service and consulting business from around the globe. Nevertheless, it is not considered an attractive high-tech manufacturing center, and it hasn't been able to gain traction in its quest to compete with China, Vietnam, Thailand, and Indonesia for electronics production. As a result, the local electronics supply chain is underdeveloped compared with China's.

To attract chipmakers and financiers, India would have to offer very attractive incentives, including low- or no-interest loans, tax breaks, and other guarantees for smooth takeoff. It might even have to set itself up as a financial partner to reduce the risks investors must assume. Indications are that the government is seriously considering these steps. In the press release from Accenture, Ajay Kumar, joint secretary of India's Department of Electronics and Information Technology, said he believes “this initiative will help create an ecosystem for electronics system design and manufacturing in the country.”

At this point, the idea of a vibrant semiconductor fabrication industry in India remains a fond wish. Accenture may be able to help the country establish the modalities and terms for attracting and retaining investors, but these represent only the basic foundation for the more difficult job of winning over investors who are also being wooed by other nations around the globe.

6 comments on “Accenture to Review IC Fab Proposals for India

  1. elctrnx_lyf
    June 8, 2012

    India should become more aggressive and invite the fabrication houses to set up the industry. This could spur in a huge electronics manufacturing industry towards India and the cost of the end product can be reduced. 

  2. _hm
    June 8, 2012

    It looks more like chimerical dream of Indian Government. It is since long they are looking for partner. I wish soon they find suitable partner.


  3. prabhakar_deosthali
    June 9, 2012

    There are so many big private industrial houses in India with huge cash reserves. Instead of looking outwards if Indian govt is successful in tapping these internal resources and promises them with good tax incentives and right infrastructure they will definitely come forward. These industrial house have enough entrepreneurial acumen and international contacts to bring in the reputed foundries to set up shop in India with their partnership.


    IC Fab is a kind of business best left to the private parties.


  4. t.alex
    June 9, 2012

    This proves that India is getting more and more serious into Fab industry. With the right policy and infrastructure in place, it will come soon. India has been the design centers for lots of MNC to date.

  5. harpat949
    June 12, 2012

    It would be a waste of time and money to put up a fab in India. It is not a particularly labor intensive industry and the industrial infrastructure is still very poor. The capital, power and water resources are no where comparable to China and many other countries. 

  6. bolaji ojo
    June 13, 2012

    Your analysis is spot on. This may be the reason why India has not so far attracted the kind of interest it is hoping for from chipmakers and investors. The companies still have to be certain of the viability of the project no matter how much incentive the government offers.

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