IBM and STMicroelectronics look to invest Rs 50,000 cr in chip-making in India

New Delhi: India appears set to get its first chip-making facility with at least two global players - IBM and STMicroelectronics - in advanced stages of talks with the government for an investment of over Rs 50,000 crore.

Both STMicroelectronics, Europe's largest chipmaker semiconductor player, and the consortium comprising IBM have indicated that they would initially invest over Rs 25,000 crore each, at least two government officers familiar with the development told TOI. Through the investment the government is hoping to not just get valuable foreign exchange but also go for import substitution.

The location has not been finalized, but top government sources said that one of the investor consortiums has indicated that it wants to set up the facility near Greater Noida, while another one has been proposed in Gujarat. A third option is near Bangalore where an information technology investment region ( ITIR) spread over 42 square kilometers is being set up.

STMicroelectronics did not respond to a questionnaire sent on Monday, while an IBM spokesperson said the company it "does not comment on rumor or speculation".

The units are expected to get concessions worth nearly Rs 60,000 crore over 13 years, which will include a three-year construction period and the first 10 years of operations. "Chip-making requires high quality power and water supply, which need massive investments. Besides, globally companies locate facilities where governments offer certain benefits," said a high-ranking officer. Taiwan, South Korea and China have used concessions to attract investors.

Commerce & industry minister Anand Sharma confirmed that talks were underway but did not disclose details. He told TOI that the move was part of the government's drive to reduce dependence on import of products and shift to local manufacturing to deal with the problem of current account deficit. He said the demand for electronic hardware is expected to reach $400 billion by 2020, compared to around $45 billion now. A government estimate suggested that this requires investment of around $100 billion, which will create around 28 million.

Although India is an important centre for chip design and verification, production is non-existent. If the investments materialize, they would create a large vendor base and would result in further foreign investment into the country.

This is India's second attempt to attract chipmakers into the country after an earlier bid failed five years ago. In 2007, the government had announced a package to woo investors but had to revise it last year to make it more attractive. Intel and SemIndia were companies that had shown interest.

Even this time Planning Commission has certain reservations but the issue is set to be decided by the Union cabinet.