AMD, NRIs plan $3 bn chip unit

US chip major to provide technical help for India's first advanced fabrication facility.

US chip maker Advanced Micro Devices Inc and SemIndia, a newly formed consortium of non-resident Indians, today signed a memorandum of understanding (MoU) for investing $3 billion for setting up India's first advanced fabrication facility.

The US chip major will provide technical assistance to SemIndia for setting up of the plant but has not signed a contract for purchasing the chips.

"This is a technology transfer agreement and there is no contract to buy the products," AMD Chief Executive Officer Hector Ruiz told a Press conference. The location for the project is yet to be finalised.

The fabrication unit will be set up by a SemIndia-led consortium which would include financial institutions, venture capitalists, private equity funds, the government and AMD. Ruiz said AMD may pick up a stake in the proposed plant.

The company is currently in talks with several state governments for finalising the location of the project, where construction is expected to start in a few months and will take at least two years before it is completed, SemIndia CEO Vinod Aggarwal said.

"We are also in talks with the Central government for a public-private partnership to set up a fabrication city, which will house multiple fabrication plants," he added.

A fab plant typically employs at least 2,000 people and a fab city can generate millions of jobs, Aggarwal said.

While China, Singapore, Taiwan and Malaysia have fabrication plants, this MoU marks India's entry into the league. China already has around 40 fabrication plants and another 20 are expected to be added to the list by 2008.

Indian Equipment Manufacturing Company, another consortium of NRIs, was in talks with the government for investing $3-4 billion in a semiconductor fabrication facility.

Intel had earlier proposed to set up a wafer testing facility in India but the investment did not materialise as the government refused to provide a special dispensation on taxation for the world's largest chip maker.

"The idea is to bring down the price of chip so that everyone in India can use computing. We plan to create customised products for the Indian markets," said Ruiz.

With all consumer electronic goods using chips, the growth of consumer electronics market in India is likely to generate a huge demand for chips in India. Aggarwal said that the consumer electronics industry in India should be $ 150 billion by 2016.