SemIndia Inc has decided to go ahead with the $100-million Phase I assembly, test, marking and packaging (ATMP) facility.
SemIndia to go ahead with smaller phase I, but larger project is delayed
HYDERABAD: SemIndia Inc has decided to go ahead with the $100-million Phase I assembly, test, marking and packaging (ATMP) facility even as uncertainty shrouds the major portion of the $3-billion chip manufacturing project in the proposed FabCity complex.
Phase I has achieved financial closure and work will start soon, Vinod K Agarwal, president and CEO SemIndia confirmed to DNA Money.
“We have commitments for our $100-million phase I project, which is mostly the test and assembly facility,” he said. This includes equity from strategic partners and promoters and debt from banks, he said, without specifying how much each of the partners AMD, Flextronics and BOC will hold in the project. “We do not plan to give out any further information on the structure of the financing for this phase.”
While industrial gases giant BOC Gases, which was recently acquired by German giant Linde, had said it would invest $100 million in the SemIndia project, AMD will reportedly invest $500 million. Flextronics’ investment is unclear. It was also not clear how much each of these partners was investing in Phase I of the project.
Agarwal said it will take about 12 months for the Phase I plant and machinery to be ready and the first packaged chips should be rolling out approximately in October 2007. The wafers will be imported from different countries depending on the customers, he added.
Apart from SemIndia, which is anchoring the FabCity project, California-based Tessolve Services plans to set up an ATMP facility here with a capacity to handle four million units per month.
However, uncertainty dogs these projects pending the announcement of a semiconductor policy by the Centre. SemIndia is waiting to read the fine print before deciding on the fate of the more substantial Phase II of the project, Agarwal indicated. More significantly, the delay in announcing the policy is now certain to lead to time and cost overruns in implementation of the FabCity project, which was earlier expected to be completed by June 2008. “Now there is no way it can be completed before 2009, given the delays,” a senior government official said.
Apart from tax credits equal to 30% of the investment in semiconductor projects, the semiconductor industry has been expecting a viability gap funding to the extent of 26% of the equity in cash from the Centre. Alternatively, it is said to have proposed extending a five-year interest free loan of up to Rs 400 crore or a 10-year interest-free subsidy of 50% up to Rs 500 crore.
However, unhappy about many of these provisions, the finance ministry is understood to have proposed a watered down version of the draft suggested by the MIT. With the impasse between the ministries of IT and finance delaying the policy, potential investors are watching before they decide on their proposals.
“We are basically waiting to see what policies are announced by GoI on this semiconductor manufacturing initiative. Once those policies are announced, then we can go forward,” Agarwal said. He pointed out that other countries, including Israel and Germany were offering the same initiatives covering as much as 30-50% of the project cost.
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