The Iron is Hot

Does anyone remember an entity called the Semiconductor Complex
of India?

This Mohali, based organization was set up in 1984, by some
visionary, who no one remembers today. The objective was to create an
organization that would design, develop and fabricate prototype microprocessors,
especially in the VLSI category. Perhaps it was an idea too early for its time.
Gradually the institute faded, and had nothing much to talk about.

While India's earliest attempt at design and fabricating
microprocessors was heading nowhere, there were lots of private initiatives
going on for VLSI and chip design. Over the next 15 years, the top ten chip
designers of the world including Intel, AMD, and Infineon had set up shop here.
And their activities in India were growing manifold every year. Perhaps the best
approach for SCI would also have been to hand it over to entrepreneurs. That it
must stay away from IT was something that the Government learnt to do several
years later.

The SCI experiment might have been too early, but today is
surely the best time for India to be moving beyond the design stage, into
manufacturing. The domestic market is huge, India's cost and talent advantages
have been proved beyond doubt, the overall environment for any form of
manufacturing is getting conducive, lots of investments are going into improving
infrastructure, and there is by and large political and economic stability. And
this is what chip manufacturers look for, before deciding to put millions,
perhaps billions of dollars for setting up a fab unit.

All the new places where chip manufacturing has happened,
including Malaysia, Israel, Taiwan, China, Korea, the Government has backed them
with capital and other fiscal incentives. The Government of India's incentives
of 20% for units located inside SEZs and 25% to those located outside, is not
very motivating. And the recent developments on the SEZ front could also prove
to be a dampener. In any case, we are yet to see significant action happening on
the various announcements made so far. The Government will need to play a more
active role.

While the IT minister has done a great job in getting the big
names to come to India, he has a more challenging job ahead. Getting other
ministers-finance, industries, power, roads, education, and so on-to support
him. Success of these manufacturing plants will depend on factors ranging from
financial incentives to manpower availability, to good quality power supply,
among other things. But before all this, he must quickly put down the detailed
semiconductor manufacturing policy, so that there is complete clarity.

Setting up of semiconductor fab will open up a whole lot of
ancillary opportunities that will generate revenue, skills as well as job
opportunities. But chip fabrication in India is not just about business and
economics. We must understand that chips are the most basic component of
computing and communications devices today. They are the heart and soul of
information technology. If India plays a key role in its design today, it should
also get an opportunity to manufacture them. That way it will have greater
influence on the global IT map. And it is time India proves a point in areas
beyond software and services.

The author is Group Editor of Dataquest. ibrahima@cybermedia.co.in