India enjoys $6.5bn flood of
high-tech investment By
Siddharth Srivastava
NEW DELHI - India's
status as a low-cost, high-tech manufacturing
destination has received a considerable fillip.
In the past week, India has hosted the
chief executive officers of the top computer
chipmakers of the world, Craig Barrett of Intel
and Hector Ruiz of Advanced Micro Devices (AMD).
Their aim: to usher in a computer revolution in
line with the exponential growth of mobile phone
users.
US chipmaker AMD has signed up to
play a major role in the country's first chip
fabrication factory (or fab) worth $3 billion,
backed by a consortium of Indian businessmen.
Following up on
AMD's decision, competitor
and world's largest chipmaker, Intel Corporation,
has announced a multi-year investment plan for
India, totaling more than $1 billion, including
$800 million over the next five years for business
expansion.
The AMD and Intel plans are
aimed to take advantage of the high-tech
revolution in India that has seen the mobile phone
user base jump to more than 70 million in just
five years. Low cost combined with good service
and networks have contributed to this large jump.
State-of-the-art cell phones are now available in
the country at US$20 and consumers cut across
social and economic barriers.
In a move to
tap the Indian market, UK mobile
telecommunications company Vodafone recently
bought a stake in India's largest wireless
operator, Bharti Tele-Ventures Ltd. In October,
communications equipment maker Cisco said it
planned to invest $1.1 billion over the next three
years and triple its staff numbers in India.
The expectation is that a similar
penetration can be achieved with personal
computers (PCs) as well, once prices come down.
Unlike mobile users, there are fewer than 3.5
million PC users in the country. Computers are
still considered quite expensive and the market
has not responded despite prices having tumbled to
less than $250 and broadband connections costing
three times less than last year.
By
investing in India, Intel and AMD hope to address
the price factor that will determine the market.
Lowering the cost of computer chips while
improving their efficiency is at the heart of the
ongoing AMD versus Intel race. "We will bring out
a low-cost PC - not a gadget or semi-PC that some
are interested in, but a fully functional computer
meant for Indian conditions priced in the range of
a few hundred dollars," Barrett said.
The
demand for chips in India is expected to be at $3
billion a year starting in 2006, from about $800
million. This is still far less than the global
total chip industry size of $220 billion. Although
India has developed a large software and
outsourcing industry, semiconductors (the
technology used in chips) remain a fairly small
business. Few chips are designed in India compared
to in the US, China or Taiwan. So far, no major
fab facilities exist in the country, though
investors have toyed with the idea.
Ruiz
said: "We will remember this day as a historic
moment in India. The idea behind the tie-up is to
bring down chip costs so that everyone can afford
a PC."
AMD will provide SEMIndia, a
public-private partnership with the Indian
government, with manufacturing and technology
licenses for a new chipmaking and assembly test
mark and pack (ATMP) facility. The plant's
location has not been finalized, though several
destinations in south and east India are being
considered.
AMD's arrival demonstrates
that India is crucial to its "50x15 plan", under
which it wants 50% of the world's population to
possess a PC Internet connection by 2015.
"India's growing market for phones,
computers and broadband, has no doubt raised the
interests of all global manufacturers to be here,"
Communications and Information Technology Minister
Dayanidhi Maran said after signing the deal.
Intel, however, has not announced plans to
set up a chip-manufacturing plant in India. It
seems that the tech giant is sticking to its two
Asian chip-making units in China and staying
focused on the predominantly "services, software,
design and engineering" orientation of India.
The investment roadmap includes a huge
chunk ($800 million) for expanding the company's
business operations in India, Barrett announced.
The investment would focus on expanding the
research and development center in Bangalore, in
addition to marketing, education and community
programs.
The roadmap also has a provision
for setting up a $250 million venture capital fund
in India. Intel Capital has in the past invested
in India's NIIT Technologies, rediff.com and
Indiainfoline.com, and now plans to find mobile
telecommunications, broadband software and
hardware design companies to fund.
However, the company remained
non-committal on its plans for a
chip-manufacturing plant in India, saying it was
involved in "pragmatic" discussions with the
government and it was not appropriate now to say
anything.
"Computers do not result in
learning by themselves, good teachers do ... By
the time Intel completes 15 years here, we will
have trained 1 million teachers in India and that
is a crucial effort," Barrett said.
"We
are still in discussion with the government on the
possibility of setting up a manufacturing plant in
India. At this point of time we are not ready to
announce anything. India may grow increasingly
powerful in manufacturing, just as China will grow
in services and product development, but for now
we do not plan to manufacture in India."
Minister Maran some months ago announced
that Intel would be setting up a $400 million
assembly test-manufacturing unit in India, but it
seems the plans have been put on hold now.
"The investment demonstrates the company's
long-term commitments and builds on the foundation
we created during the last 10 years," Barrett
said. "We will grow our local operations, boost
venture capital investment and work closely with
the government, industry and educators to increase
the impact of the country's information and
communication technology."
It seems PC
users in India have plenty to look forward.
Following the visits of the chiefs of AMD and
Intel, Bill Gates, chairman of Microsoft, was in
India on Wednesday. Gates, in his fourth visit in
two years, announced that Microsoft Corp plans to
invest $1.7 billion in India over four years and
employ another 3,000 people to deepen its presence
in India. This is apart from the humanitarian
causes that Gates and his wife have taken up in
India.
About half of the money would be
spent on its existing research and development
center and global software delivery unit as well
as expanding to 33 more cities by opening retail
outlets.
"We have about 4,000 people [in
India], we would be growing that by 3,000 over the
next several years," Gates said at a news
conference.
Microsoft relies heavily on
India's booming $20 billion software services
industry to source quality skills at costs far
below average Western salaries.
Siddharth Srivastava is a New
Delhi-based journalist.
(Copyright
2005 Asia Times Online Ltd. All rights reserved.
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