''Government should participate in fiscal and equity''

R jai Krishna

CHENNAI: The Semiconductor industry is pushing the Government for fiscal as well as equity participation as part of the forthcoming policy.

Talking to Cyber Media News in Chennai, Bob Kondamoori, Managing Director of Sandalwood Partners, an India-specific venture fund, said that India has the potential to produce one million chips in one year by some of the fantastic companies in the country.

Calling the semiconductor as the ‘oil of the info age’ he said: “We should have a clear semiconductor policy by the end of the year and the Government should be taking up a fiscal and equity participation in the companies to the extent of 25 per cent if not 30 per cent, which is the case across the world. Anything less than that would be just an half-baked offer, which the industry would not like to take.”

Kondamoori said that semiconductors is a suppliers market and a policy in this regard would help India reach the 10 per cent growth in the GDP.

“The semiconductor industry is worth $500 million, and only $12 million comes to India,” he said adding that the rest 488 goes to China or Taiwan, where the Fabs are present.

“It is a hockey stick growth in this industry and India is next major in fab. In all the other countries, the government offers fiscal sops. In the case of AMD, the New York State in US offered $900 million, Arizona State offered 15 per cent fiscal equity for Intel, which also got $1.2 billion 38 per cent for its Fab in Israel from that country. It is a similar case with Infineo semiconductors in which German government invested $250 million, and even China invested $750 million for the industry, which includes $3 million for SMIC,” he said adding that all these were real cash subsides.

Kondamoori lamented that most designs and layout of the engineering or architecture for the chips are done in Chennai, Pune and Chandigarh, which is worth $300 million, as compared to the semiconductor chip sales which is put at $2 billion and set to increase to 40 billion USD by 2012, according a Frost and Sullivan report.

“We are in chip designing, Assembly and testing , and also in marking and packaging, but we are missing out on the major part of manufacturing Wafer Fabs,” he said.

In this context, Kondamoori accused the MNCs are using Indians as service companies and thus the IP profits are sucked out. “Semiconductor industry has the potential to be a trillion dollar industry and to gain it we should have a policy put in place at the earliest, if we delay we might miss the window,” he said further.

When Cyber Media News contacted Union IT and Communications Minister, Dayanidhi Maran, he said that his ministry was fully with the industry and now the ball lies in the Finance Ministry’s court.

V Veerappan, Co-founder and Vice-President of Tessolve Services, as well a board member of Indian Semiconductor Association (ISA) told Cyber Media News that the draft policy was discussed among their members and had been forwarded to the IT and Finance Ministries.

“We want the government to participate in all the units, which are coming up, by way of fiscal and equity participation. In the draft policy, we have asked for ate last 25 per cent in this regard,” he added.

Now, it remain elusive, whether the government would participate fiscally and also by taking equity in the units. If it does so, then not only the industry tends to gain, but it would also create more jobs in the ICT sector.

On the other hand, industry observers opine that it would be a new dimension in the policy-making initiative of the Government, which would be now put on par with international standards.

© CyberMedia News