Three things in Indian semicon: Vinay Shenoy

April 2, 2014

Vinay Shenoy

Vinay Shenoy

There have been a variety of announcements made by the Government of India in the last one year or so. In the pre-90s period, the country showed just 1 percent GDP growth rate. It was adverse to FDI and had a regulated market. All of this led to deregulation under the late PM, PV Narasimha Rao.

The Indian government was averse to foreign investment, which was opened up around 1994. Since then, we have seen 6-8 percent growth, said Vinay Shenoy, MD, Infineon Technologies (India). He was delivering the keynote at the UVM 1.2 day, being held in Bangalore, India.

Around 1997, India signed the ITA-1 with the WTO. Lot of electronic items had their import duty reduced to zero. It effectively destroyed the electronics manufacturing industry in India. We were now reduced to being a user of screwdriver technology. In 1985, the National Computer Policy, and in 1986, the National Software Policy, were drafted. The government of India believed that there existed some opportunities. The STPI was also created, as well as 100 percent EoUs. So far, we have been very successful in services, but have a huge deficit on manufacturing.

We made an attempt to kick off semicon manufacturing in 2007, but that didn’t take off for several reasons. It was later revived in 2011-12. Under the latest national policy of electronics, there have been a couple announcements – one, setting up of two semicon fabs in India. The capital grant – nearly 25-27 percent — is being given by the government. It has provided a financial incentive – of about $2 billion.

Two, electronics manufacturing per se, unless it is completely an EoU, the semicon industry will find it difficult to survive. There is the M-SIPS package that offers 25 percent capital grant to a wide range of industries.

Three, we have granted some incentives for manufacturing. But, how are you going to sell? The government has also proposed ‘Made in India’, where, 30 percent of the products will be used within India. These will largely be in the government procurements, so that the BoM should be at least 30 percent from India. The preferential market policy applies to all segments, except defense.

Skill development is also key. The government has clearly stated that there should be innovation-led manufacturing. The government also wants to develop PhDs in selected domains. It intends to provide better lab facilities, better professors, etc. Also, young professors seeking to expand, can seek funding from the government.

TSMC promotes small IP companies. Similarly, it should be done in India. For semicon, these two fabs in India will likely come up in two-three years time. “Look at how you can partner with these fabs. Your interest in the semicon industry will be highly critical. The concern of the industry has been the stability of the tax regime. The government of India has assured 10 years of stable tax regime. The returns will come in 10-15 years,” added Shenoy.

The government has set up electronics manufacturing clusters (EMC). These will make it easy for helping companies to set up within the EMC. The NSDC is tying up with universities in bringing skill-sets. The industry is also defining what skills will be required. The government is funding PhDs, to pursue specialization.

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