Videocon, Reliance ‘ready’ to invest Rs 25,000 cr in chip-making units

Home-grown electronics brand Videocon and Reliance Industries are ready to set up chip manufacturing plants.

In proposals sent to the Government for setting up semiconductor fabrication plants, the two companies have offered to invest some Rs 25,000 crore on the condition that the Government provides incentives.

Venugopal Dhoot, Chairman, Videocon, told

Business Line , “We plan to set up a semiconductor fab plant at Vashi in Mumbai. But we want subsidies and protection from import of IT products. The Government should not give zero per cent duty on import of such products to encourage domestic manufacturers.” He said the company is ready to invest at least Rs 5,000 crore for setting up a small plant. “If semiconductor fabs are not manufactured in India, then prices of mass consumption products such as mobile phones and televisions will keep increasing,” Dhoot added.

Though Reliance declined to comment, industry sources said the Mukesh Ambani firm was looking to invest close to Rs 18,000 crore in the project. The company has sought subsidy worth Rs 4,000 crore. The plant is likely to come up in Jamanagar SEZ or Navi Mumbai if the Government accepts the proposal.

Market potential

Semiconductor fabrication is essential to promote local manufacture of electronic items. From smartphones to television to cars, every thing electronic has an in-built chipset that controls its operation. Globally, chipset market is dominated by Intel, Qualcomm, AMD and Texas Instruments. According to the Department of Electronics and Information Technology, the demand for electronics hardware in the country is projected to increase from $45 billion in 2009 to $400 billion by 2020.

Recently, the Finance Ministry announced zero customs duty on plant and machinery for semiconductor facilities. Minister for Communications and Information Technology Kapil Sibal had on Monday said the government had received two proposals for semiconductor manufacturing plants but did not name the companies.

He said that the proposals would be sent to the Cabinet for approval. Sibal had said the exact level of Government support will be decided through negotiations with the companies. The Finance Ministry feels incentives should be linked to production and marketing through indirect tax concessions rather equity or grant.

Lack of MNC interest

In June 2011, the Government had invited technology providers and investors to submit a preliminary proposal for setting up semiconductor fab units. While a number of global players had shown interest in giving advisory support, none wanted to invest in India. “First, the market itself has to be big to justify the investment, then the Government has to put in a significant amount of investments. Most chip-makers have established manufacturing facilities globally so why should anyone look at India now,” said an MNC chip-maker.

>ronendrasingh.s@thehindu.co.in