Flextronics to invest in Indian fab project

Contract manufacturer Flextronics will invest in a large semiconductor manufacturing facility being set up in India by SemIndia, giving a significant boost to the fledgling project, Flextronics announced Tuesday.

Flextronics of Singapore will also use chips produced by SemIndia to make products such as mobile phones at a factory that the company is setting up in Chennai, India, the company said. Flextronics’ new factory is scheduled to start operations by the end of July.

SemIndia, which is a consortium of investors, announced plans in November to set up a wafer fabrication and assembly and test operation in India with process technology from Advanced Micro Devices.

The $3 billion fab will operate under a partnership between the private sector and the Indian government. Of the total cost of the facility, about $1 billion is likely to be in equity, of which the Indian government is expected to contribute about 26%, Vinod Agarwal, chairman, president and CEO of SemIndia, of Delaware, said Tuesday.

The Indian government announced in February that it will assist new ventures in high-tech manufacturing, including semiconductors, with both equity participation and “viability gap funding.” The government’s viability gap funding tries to compensate for the higher costs incurred by new ventures in India because of extraneous factors such as poor infrastructure.

The SemIndia facility will be India’s first large semiconductor manufacturing facility. A number of semiconductor companies, such as Texas Instruments, have chip design facilities in India, but have been reluctant to set up fabs because of its poor infrastructure.

Besides Flextronics, which will make a minority investment in the fab, SemIndia expects other investors to announce shortly that they will pick up equity stakes in the project, Agarwal said. Broadcom President and CEO Scott McGregor told reporters in Bangalore in December that his company would consider contracting production to the SemIndia project.