'FAB' Shouldn't Become a Fable!

India Inc. better watch out. Even as the brouhaha over outsourcing still
rages, and the debate about the extent of the foothold India has gained over the
global IT industry continues unabated, headlines about India's having
"made it" once again, this time as a preferred hardware-manufacturing
destination are slowly becoming the norm, making India the cynosure of all eyes
once again.

Just about last week, Andhra Pradesh chief minister YS Rajasekhara Reddy
declared that a Seoul-based company has decided to set up a billion-dollar chip
making unit, while Intel CEO announced that India figures as one of the many
preferred locations for its next manufacturing unit. But whether these
announcements will amount to anything and help India strengthen its trace on the
global radar, or just remain mirages in the desert yet remains to be seen.

It was also announced that Korea-based, Intellect Inc. has decided to set up
a fab facility in two phases with over investments of $2.6 bn, for which the
government has allocated 50 acres of land. The project also aims at generating
10,000 employment opportunities. Call it catching the prospective investors or
stepping on the gas to showcase the party's prowess, through the announcement,
the Andhra Pradesh chief minister has, either way, raised many an eyebrow.

The state government has been flaunting facts and figures as to the kind of
investments being pitched in for the facility, the amount of land the government
is allotting and the number of employment opportunities the proposed fab is
going to generate. But it must understand that a company submitting a project
proposal with investments required and considering setting up a facility is not
such a big deal. The seriousness of the company involved, whether and how the
planned investments of over a billion and more dollars will produce desired
results, and if the state supports the required infrastructure are all factors
that have to be looked into.

Above all, it's imperative to determine if there exists a potential
consumer market for the chips that would be manufactured in the proposed
facility. For this, the company needs to have tie-ups with various firms that
would require them. And the state government is pretty unclear if the company is
mulling on any such tie-ups at all in the country or abroad.

Also, the phase I facility involving $600-700 mn is expected to be a
rudimentary unit or possibly a kind of relocation of the existing unit
somewhere, as per industry sources. The government should also take into account
that there already exists an excess capacity globally in chip making. Biggies
like China, Korea have flooded the market in advance, so it is crucial to focus
on the increasing demand for semiconductors with a growing base for consumer
electronic goods and mobile telephony market in India, and expedite the process
of materializing the actual investments. For this, the state government should
set up a team of technical experts to evaluate the implications of the facility,
provide suggestions if any, and that can also strongly put the plan into action.

And this being a first-of-its-kind of unit, since India missed out on IT
hardware manufacturing opportunities, a great deal more study has to be done by
the government to avoid any fatalities and extend all possible support, be it in
the form of quality power, water, or easy customs procedures. Only then will the
entrepreneurial visionary and energy our country possesses in titanic
proportions can be evident to the world and equally give a boost to the country's
economic prosperity.

Sunitha Natti/CyberMedia News