GMR in race to set up semiconductor unit

Infrastructure behemoth GMR Group has shown interest in setting up a semiconductor fabrication unit -- a complex technology project costing about Rs 25,000 crore, out of which 40 per cent is sponsored by the Centre.

According to two officials aware of the matter, GMR has approached the Department of Electronics and Information Technology and is currently looking to partner technology companies interested in the project.

GMR’s entry into the race could queer the pitch for its corporate rival Jaypee Associates and home-grown chip firm Hindustan Semiconductor Manufacturing Corporation, which have been in the fray to set up fab units since 2011.

Jaypee and HSMC were given the ‘in-principle’ approval by the Cabinet in September this year to build two fab units in the country, costing upwards of Rs 50,000 crore (Rs 500 billion).

The Cabinet had asked DEIT to open the floor for other venders as well, to apply for the sops before coming back for a final approval. The extended deadline comes to an end on the 25th of this month.

There is a possibility that the government does an evaluation of all the projects (together with the existing ones) to arrive at the most cost-effective proposal.

According to government official, if there is another proposition for the project, it will surely be considered. “It will be on the Cabinet or the advice of the committee to decide what to do then (with the existing proposals).”

The official added it is unlikely the Cabinet will approve “three or four fab proposals” and the idea in the beginning was just to subsidise one project but was later extended to two.

“They (GMR) have sounded out many global technology companies,” said one of the officials in the know of the matter. However, if the company has been successful in sealing a partnership deal is not known, he added.

Another official said the company is yet to present the formal proposal to the department.

“It seems they (GMR) are reaching out to technology partners for this.” None of the officials wanted to be named because of the sensitivity of the matter.

The fab unit produces the most complex and valuable part of any electronic device -- the chip.

India has been trying hard for several years to set up fabs in the country, which are believed to act as a catalyst for spawning a domestic electronics manufacturing industry.

“The GMR Group is in possession of land at Kakinada in East Godavari district, Andhra Pradesh, where it intends to set up an industrial park as a developer, with a complete social eco-system”, said a GMR spokesperson.

“It will be inappropriate to comment on specific business development plans, at this early stage, as it is market-sensitive and at a conceptual stage,” the company said in its emailed response to Business Standard.

The ‘in-principle’ approval was given to Jaypee and HSMC to avoid any post facto criticism of the procedure followed to incentivise them.

The empowered committee will analyse the new proposals, which will again go back to the Cabinet for a final go-ahead.

Meanwhile, GMR’s entry into the race could further delay the project approval, which has been in the pipeline for over two years.

Even with the current time-line, the facilities are expected to produce production only by 2017.

Under the current proposals, Jaypee has tied up with IBM and Tower Jazz and has proposed a facility in Greater Noida with an investment of Rs 26,300 crore (Rs 263 billion), while HSMC has partnered ST Microelectronics and Silterra and has planned its unit at Prantij near Gandhinagar in Gujarat with an investment of Rs 25,250 crore (Rs 252.5 billion).

Both Jaypee and HSMC declined to comment.

The second official quoted above said infrastructure companies such as Jaypee and GMR have evinced interest in the fab projects as these firms have land, special economic zones and might be looking for good developmental projects.

BUZZING CIRCUIT DEALS SO FAR
WHO

Jaiprakash Associates along with IBM and Tower Jazz Investment: Rs 26,300 crore (Rs 263 billion); Proposed location: Greater Noida
Hindustan Semiconductor Manufacturing Corporation (HSMC) along with ST Microelectronics and Silterra Investment: Rs 25,250 crore (Rs 252.5 billion); Proposed location: Prantij, near Gandhinagar, Gujarat

ROAD AHEAD

• Cabinet to give final approval after November 25
• Existing players expect all government approvals, including environmental, to come by end of 2014
• Facilities will take around 30-35 months to be operational and will start producing chips only around 2017

Image: GMR Group chairman and MD GM Rao; Photograph: Courtesy, GMR Group