HSMC in talks with US, Japan banks for fab funds

HSMC seeks funding of $3.5-4 bn for the project, in which ST Microelectronics and Silterra are the other two partners

Hindustan Semiconductor Manufacturing Corporation (HSMC) has initiated talks with Export-Import Bank of United States, and Japan Bank for International Cooperation (JBIC) to invest in a fabrication unit.

HSMC leads a consortium for setting up a semiconductor fabrication unit. Its chief executive officer (CEO) and founder Devendra Verma told Business Standard the discussions on the proposed investment were at the final stage and a “due diligence” was on. The corporation is seeking $3.5 billion to $4 billion for the project. The company has partnered with ST Microelectronics and Silterra to set up a unit at Prantij near Gandhinagar in Gujarat.

In an email Business Standard, a spokesman for Export-Import Bank of United States said it has received an application for financing from HSMC. On the prospects of funding being granted, the spokesman said the bank considers “all applications for financing on a case-by-case basis. Among the chief factors in our decision-making calculus are US job support, reasonable assurance of repayment, and additionality (need for EXIM involvement).”

A JBIC spokeswoman, in an email, refused to comment on the project. Two years back, the government had given an in-principle approval for two proposals to set up units and was ready to subsidise as much as 40 per cent of the project cost. One group is led by Jaiprakash Associates (Jaypee), the other by HSMC.

Business Standard had reported earlier this month that both the consortiums were facing difficulties in tying up funding for the projects. However, Verma said it is in “serious discussions” with both the agencies and is also exploring the possibility of bringing on board a strategic partner. “We will communicate the same to the government soon.”

Setting up a fabrication project is supposed to be central to the past and the current government’s efforts to boost domestic electronic manufacturing in the country. India imports a majority of its electronics and the government expects the country to import electronic goods worth almost $300 billion, of its total demand of $400 billion by 2020. India’s electronics import bill could, thus, exceed that of oil. Local fabrication will reduce import, stimulate investment in the economy and create jobs.