The Grand Folly of India's Foundry Plans

By SemiWiki

July 7, 2014

At the beginning of the year, New Delhi’s outgoing government launched an initiative purported to drive the nation’s technology independence and reduce the current account deficit on electronics imports. The initiative describes a partnership between New Delhi and two industrial consortiums for the building of semiconductor manufacturing plants – one outside of the capital and the other in Western Gujarat.

"Every age has its peculiar folly: Some scheme, project, or fantasy into which it plunges, spurred on by the love of gain, the necessity of excitement, or the force of imitation." - Charles Mackay, “Extraordinary Popular Delusions and the Madness of Crowds”

The plan is ambitious. The 28nm fab near New Delhi and the 22nm foundry in Western Gujarat will each support 40,000 wafer starts per month. The plan is also very expensive. Together, the facilities are projected to cost just under $11B USD. The government’s role in these two separate efforts is essentially that of a zero cost banker. Each consortium will receive an interest free loan of approximately $900M USD. Furthermore, the central government is on the hook for 25% of the total capital outlays, and is providing further incentives in the form of a bundle of tax deductions and duty exemptions. Thus, New Delhi’s expenses in this effort, not counting the tax incentive bundle, are just shy of $4B. What did the previous Cabinet expect to receive as a benefit to the nation for such an industrial policy?

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