By Michael Kanellos
Thursday, December 01 2005 09:54 AM
URL: http://www.zdnetasia.com/news/business/0,39044229,39294582,00.htm

India may finally enter the chip market with a little help from Advanced Micro Devices.

Sunnyvale, Calif.-based AMD has signed a memorandum of understanding to allow SemIndia to license, process, manufacture and test AMD technologies for a fabrication facility it intends to build.

Although India has developed a large software and outsourcing industry, semiconductors remain a fairly small business. Few chips are designed in India compared to in the U.S., China or Taiwan. An Intel server chip being designed in India was even cancelled recently. And the country's universities have only begun to emphasize chip design in the past few years.

So far, no major fabrication facilities exist in the country, though investors have toyed with the idea.

Obtaining technology know-how from AMD could enable investors in India to leap ahead several years. Once considered a laggard in manufacturing, AMD is now a cutting-edge manufacturer, holding several awards from industry organizations.

SemIndia is a public-private consortium trying to build a semiconductor industry in India. Getting chipmakers to build factories in India has been an uphill climb. India has shown a willingness to offer tax breaks to foreign tech investors, and its labor costs are lower than in the U.S. or Europe. But India suffers from poor electrical systems and water facilities, two key elements for chip manufacturers.

The technicians and engineers required to run a fab are also easier to find in places like Taiwan or Israel.

Companies with an Indian factory, however, can reach a growing domestic market faster.

AMD did not state whether it would eventually manufacture chips in India. It is also unclear how much of its technology it will give to SemIndia. Part of AMD's manufacturing technology comes from IBM under a licensing arrangement.

"We will remember this day as a historic milestone in India's economic and manufacturing progress," AMD CEO Hector Ruiz said in a prepared statement. "AMD is committed to succeeding in global high-growth markets, and we are proud that AMD's industry-leading microprocessors and manufacturing capabilities will enable SemIndia to develop its own innovative solutions and expand the global market for information technology."