SEMI-CONDUCTOR PROJECTS GALORE

New Delhi, September 29, 2008
Business Standard

The Indian semi-conductor industry lobbied hard and eventually obtained an elaborate package of incentives from the government to enable India to secure a foothold in the global semi-conductor play. But market forces have caused a range of private projects to be announced, and action has been taken on some of them even before any incentives have been sanctioned! Over a dozen proposals have been announced, proposing a massive investment of Rs 1,36,000 crore. Work has already started on a couple of projects, which are likely to go on stream by 2010. Thus, in the field of semi-conductors, which lie at the heart of information technology and in the manufacture of which India has so far been a non-starter, the train has left the platform — without any of the incentives which were controversial when they were announced, because many considered them unnecessary, for two very good reasons: the industry is hugely capital-intensive and delivers low margins, and what it produces is easily imported.

So why spend vast sums of pubic money in bolstering up such an industry?

The rapid progress has happened mostly because of the way oil prices have skyrocketed in the last couple of years, making the whole world and India, as one of the major emerging consumers of energy, take a fresh hard look at renewable energy. Most of the proposals aired so far relate to the production of solar panels and target photovoltaic and poly-silicon. The latter is used to manufacture photovoltaic modules that make up arrays or solar panels. Prominent companies, which are serious players include Moser Baer and Tata BP Solar. Activity has taken off in this segment of the semi-conductor space because of two reasons. The manufacture of poly-silicon in India is now considered viable in view of the current high global prices, which are the result of a global shortage of capacity. On the other hand, those who are going in for the manufacture of photovoltaic with imported poly-silicon are hoping that the price of the latter will go down once several projects under construction all over the world come on stream.