Android Ecosystem Emerges, India's Fab

India may soon finally receive its first high-tech chip fabrication facility. The government of India has been pushing to set up chip fabrication facilities for quite some time now. STMicroelectronics is Europe's largest chip-maker and the consortium by IBM have both been active in the support of developing fab units. An $8 billion investment had recently been made on behalf of the federal government at an 11 percent stake of each entity.

Satya Gupta, Chairman of the Indian Semiconductor Association stated, “Building and running a fab is a complex business that is very sensitive to utilisation and improvements in technology.”  The federal government will offer incentives such as tax breaks, capital spending and  interest-free loans. Kapil Sibal, Communications and Information Technology minister for India had stated last month, “The country needs no less than 15 fab units.”

No specific location has been determined yet for the high-tech chip fabrication facility. Government sources indicate that the two consortiums have sought out locations in Greater Noida and Gujarat. Bangalore is also in consideration.  

Android is a trusted leader in technologies. India is known for its IT professionals and talent pool. The market is driven by lower cost. According to IDC, the Indian smartphone market was taken over by Android from Apple by a significant margin of 90 percent first quarter of 2013. Samsung is a major competitor in the space with its affordable devices.

Samsung currently has profits of $7.76 billion. The company margins almost doubled since last year in part from its chip-making division. According the WSJ, The importance of Samsung’s chip unit — comprised of memory and logic chips — is being highlighted as it now accounts for roughly one-fifth of its total operating profit.

Android’s operating system has dominated on a global basis. Chipmaker Intel has recently developed partnership with Google. Intel has been very aggressive with its expansion efforts in mobile emerging markets such as India. Innovations in the Android community from chip makers and manufacturers have contributed in driving growth.

Intel has also recently announced news this week of opening its leading-edge factories for a premium offering. If competitive prices lower in the hardware sector, companies such as IBM and Samsung will be pressured to compete.

The importance of developing chip fabrication units for India is substantial. A high-tech chip fabrication unit requires approximately $2 billion for development. Intel is currently upgrading one of its facilities in the US which could result in an unit being set up in India. Annually, close to $2 billion is derived in revenue from chip design services. The consumption of electronic products for India has had substantial growth in mobile phones, tablets, TVs, PCs, accessories and electronic systems for manufacturing plants.