SEMICONDUCTOR COMPANIES SEEK OWN TECH PARKS

K V Ramana & C Chitti Pantulu, Hyderabad/Bangalore
DNA

The market for semiconductors in India is expected to grow to $7.59 billion by 2010, riding on the unprecedented demand for products like set-top boxes, mobile phones and storage flash memory, among others.

Notwithstanding this growth potential, local electronics and more particularly, semiconductor manufacturing, is limited to pockets of excellence. "Despite efforts, facilitated through policy changes and incentives, there has been a failure to create an ecosystem for nurturing electronics manufacturing within the country," says the 2008-10 market update from the India Semiconductor Association (ISA) and consulting firm Frost & Sullivan.

"There is no financial incentive or motivation to manufacture electronic products in India despite having a mature design and software industry," the ISA said in its wish-list to the finance minister. There is a trading mentality among entrepreneurs thanks to the inverted duty structure which makes it more attractive to import end-products than take up domestic manufacturing, the document noted.

"Local electronic manufacturing in India offers a $20 billion plus investment opportunity in India over the next 3-5 years," the update said.

"The ISA wants special incentives for the sector, including reduction in the excise duty on local electronic manufacturing to 4% from 8% to cover inefficiencies of local manufacturing. The government should also look at progressively increasing tax credits for higher value addition in the form of local manufacturing done from CBU to SKD to component level," Poornima Shenoy, president of ISA, told DNA.

One significant deviation is on the STPI scheme, where the ISA has called for tweaking the STPI and SEZ scheme to suit the fables semiconductor companies.

"The STPI scheme was formulated to promote IT services industry. It has to be modified to provide a push to fabless semiconductors. Perhaps another Semiconductor Technology Parks of India policy is needed," the pre-Budget memorandum said. Moreover, small companies are still unable to avail the SEZ scheme due to a variety of reasons which needs to be corrected, it suggested.