India is ready to move beyond software into the very heart of computing ... and make microchips.
Its ambitions have been thwarted by inadequate water, power shortages and poor roads, but industry officials say the country now has critical mass in chip making as new firms emerge specialising in chip design, testing and packaging.
They are lured by a growing domestic market for chips, estimated at $800 million (454 million pounds) by the end of the year, and a chance to compete with heavyweights China and Taiwan to win a slice of the global $220 billion chip pie.
"There's no shame in conceding we're in this race rather late," said Finance Minister Palaniappan Chidambaram when he inaugurated Tessolve, a simulation and testing firm that officials say could serve 80 chip design houses in the city.
India ultimately wants a fabrication plant, or "fab", which would cost $3-4 billion. Poornima Shenoy, president of the Indian Semiconductor Association (ISA) said costs in China and Taiwan were helped by government support, which would also be a key factor in India's quest to build fabs.
The government has at least seven fab proposals, said Vinnie Mehta, executive director of the Manufacturers Association of Information Technology, including one from Indian Equipment Manufacturing (IEMC).
Chip-maker Advanced Micro Devices is also thinking about an Indian fab. Its India president, Ajay Marathe, said AMD was working towards making low-cost devices for India.
"At the right time, we hope to bring this expertise to benefit the Indian semiconductor industry," he said.
Information Technology Minister Dayanidhi Maran said in June that Intel, the world's top chip maker was ready to invest $400 million to assemble and test chips in India. But Intel did not confirm this.
With chips in everything from credit cards and mobile phones to medical devices, it's becoming common for "fab-less" makers to design them and outsource manufacturing to Taiwan or China.
"The semiconductor industry has a very, very long food chain," said Indian Semiconductor Association Chairman Raj Khare.
Chips are increasingly loaded with software, where India's $17 billion software industry has an edge.
Local firms now do both conceptual work and design, involving loading circuits onto silicon wafers, said Khare, who heads the local unit of fab-less chip maker Broadcom, created by buying a Bangalore start-up designing broadband video chips.
Wireless equipment maker Qualcomm paid $19 million last year for Spike Technologies. Wipro, India's No. 3 software firm, also designs chips as an outsourced service.
India has its own fab-less firm in Hyderabad-based MosChip Semiconductor, and houses engineering centres for Intel, AMD, Infineon Technologies, Freescale Semiconductor Inc., Philips and Samsung Electronics.
Applied Materials and Magma Automation, which make tools to aid semiconductor firms, are also in India.
Britain's ARM Embedded Technologies opened in Bangalore this year, followed by U.S.-based Open-Silicon, which develops, tests, packages and ships silicon on behalf of chip makers.
Open Silicon aims to roll out 20-25 different types of chips next year, said Satya Gupta, who co-founded the firm with Naveed Sherwani, a Pakistani-born U.S. scientist.
"As high-tech products become more consumer-oriented, they'll have to be more local, not global," Gupta said, underlining the growing demand for niche chips.
India is home to start-ups like wafer fabrication technology developer Vignani, wafer packager SPEL Semiconductor Ltd. and Ittiam Systems, which makes videophone prototypes.
Avinash Vashistha, managing director of independent outsourcing consultancy NeoIT said it would take India a long time to compete with Taiwan, but added that the presence of Indian fab can drive demand for design services related to it.
"The intent is not to compete...this is an enabler," he said.
India's market for mobile phones, cable TV boxes and computers will also help as local chip makers will be better placed to service the market.
India's electronics industry was estimated at $11.5 billion last year and is growing at 23 percent a year, according to a survey cited by Khare at the ISA.
"It makes economic sense to have a fab here," he said. "From a purely de-risking perspective, you need alternatives. India has all the facts to be that alternative."
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