Reliance Industries is considering a foray into the manufacture of semi-conductors. Industry sources note that the company is planning to invest up to $6 billion over five years to set up a facility to manufacture not just silicon chips used in devices such as mobile phones and computers, but also liquid crystal display units and solar photovoltaic cells.

The project is expected to be located in the company’s upcoming Special Economic Zone (SEZ) in Navi Mumbai, and will be eligible for the range of incentives offered in the Government’s semi-conductor policy outlined in March.

According to the policy, the Union Government will contribute 20 per cent of capital expenditure for units in the SEZs and 25 per cent of capital expenditure for non-SEZ units. Incentives from State governments would be in addition to this.

To be eligible, investors need to bring in at least Rs 2,500 crore for semiconductor manufacturing and at least Rs 1,000 crore for other units coming under the ecosystem such as LCDs and organic light emitting diodes (OLED). The minimum investment norms envisaged by the Government should not pose any problem for the company. At the current exchange rate for US dollar, the projected investment translates in rupee terms to Rs 24,000 crore.

The policy, however, limits government support to two or three ‘fab’ (or fabrication) units and 10 eco-system units. A few projects have already been announced.

In February this year, SEMINDIA zeroed in on Hyderabad with a stated investment of $3-billion (about Rs 13,500 crore) to manufacture semiconductors

In March, Hindustan Semiconductor Manufacturing Corporation (HSMC) announced its plan to set up fabrication manufacturing facilities in the country at an investment of $4 billion. The Germany-based Infineon has agreed to license its technology to HSMC for the production of integrated circuits for mobile phones, ID cards and automotives for the Indian market.

HSMC plans to set up two semiconductor manufacturing facilities.

The first at an investment of $1 billion will produce chips on eight-inch wafers, and the second, for 12-inch wafers, would be at an investment of about $3.2 billion.

According to a report by research firm Gartner released on Friday, semiconductor consumption in India is estimated to grow from $2.8 billion in 2006 to $7.2 billon in 2011.

Of the total available market for semiconductors (i.e. market that is catered to by locally made semiconductors) in India, the communications electronics market holds 46 per cent followed by the data processing electronics segment, including PCs and laptops at 24 per cent. Third comes the consumer electronics segment with 22 per cent.