India's ambitious plan to be a major player in semiconductors, taking on the Chinese and churning out locally-made chips for a new generation of smartphone users, has proved to be a little too ambitious.

The government boldly announced three years ago it would host two new $5 billion chip plants as part of a project to become a global manufacturing powerhouse, creating thousands of jobs, reducing its need for imports and taking on global rivals such as Taiwan Semiconductor Manufacturing and GlobalFoundries.

But potential investors have not materialized, put off by India's wobbly infrastructure, unstable power supply, bureaucratic red tape and poor planning, according to analysts and industry insiders.

Just weeks after Jaypee Infratech, which was partnering IBM Corp and Israel's Tower Jazz, abandoned plans for one of the big chip plants, STMicroelectronics NV is set to scrap plans to build the other $5 billion plant as its main local partner failed to raise enough money from skeptical investors, government officials said.

"We've had a lot of issues with the original (semiconductor) plan," a top official at India's Department of Electronics and Information Technology (DEITY) told Reuters. "The technology curve has moved ahead in the last three years, the global environment has changed and China has emerged as a big player."

Two other officials at the department said a consortium led by Indian start-up Hindustan Semiconductor Manufacturing Co (HSMC) with STMicro and Malaysia's Silterra had not been able to raise the funding for the plant, and it might be scrapped.

Investors doubted the potential of the Indian government's plan to set up a 22 nanometer (nm) chip fabricator as the industry's cutting-edge manufacturing has already shifted to smaller 14 nm chips, and is expected to move to sub-10 nm in the next three years, the officials said.

"Our original estimates for chip demand were incorrect, and we decided to postpone our plant until 2020 since there's no market for semiconductors in India yet," HSMC founder Deven Verma told Reuters.

Verma said the consortium had not yet closed financing for the plant, but had commitments for only 40 percent of the required funding. Operations had been expected to start this year.

By: DocMemory
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