Interview with Devendra Verma, chairman & CEO, HSMC

Deven-verma-ceo-hsmc

Deven Verma, chairman & CEO, HSMC

Dr Devendra (Deven) Verma, chairman and CEO, HSMC (Hindustan Semiconductor Manufacturing Corporation) has more than 30 years of experience as a technologist, venture capitalist, entrepreneur and investor. Founder of HSMC, Dr Verma and has been planning this project for the last six years.

Recently, HSMC has been given a go ahead by government of India for establishing semiconductor fab manufacturing in the country. In his first exclusive interview with TeleAnalysis, Dr Verma spoke about HSMC plans, partner eco-system, funding, manpower recruitment, technology provider, project site and client acquisition. Excerpts of the interview:

It seems HSMC has been working for last six years for setting up semiconductor fab in India. What was the ground work HSMC did for getting government clearance? What’s the opportunity for semiconductor fab manufacturing in India?
We have been working on this project for last six years. In 2008, it was about to take off but the market crashed. Before government of India selected us we had lot of meetings with government officials. We furnished lot many details and finally it was approved by the cabinet. We have worked on the fab manufacturing requirements and is far ahead in our thought process. We have the best team in place. Our semiconductor fab in charge is Dr Werner Reczek, who is also our chief operating officer. He is a German and has build 5 fabs in Europe, Austria, Germany, Malaysia and China. He has worked in different cultures and has delivered projects on time in different geographies.

India is a big country and once it get started we need many fabs as a small country like Singapore has around half a dozen fabs. India should have a dozen semiconductor fabs in 5-10 years time frame.

Name the partners in HSMC semiconductor fab consortium and what would be their role?
Semiconductor is one of the most complex processes and is very demanding on resources like purification and quality. So we have partnered with expert companies. For pure water, we have tied up with US Filter as we need lot of pure water without any impurity. We need 1,400 gases (both bulk and specialty gases) for semiconductor fab. Even some gases have to be generated on the site so we have tied up with Air Liquide as they have operations in the country. For power we are in talks with Siemens.

For construction we have tied up with ILF&S and M+W Group. M+W Group will focus on construction related to semiconductor fab for HSMC whereas ILF&S will be responsible for greenfield infrastructure development and also for making satellite cluster. The company will also focus on getting licenses and clearances from 27-28 departments. L&T will focus on constructing the facility.

Both Air Liquide and US Filter is planning an investment of $50-100 million in HSMC project.

In HSMC consortium who is the technology provider?
Silterra and STMicroelectronics will together account for 10 percent equity in HSMC. The two will also purchase large percentage of production capacity say 50 percent. HSMC people will also get trained at Silterra fab.

What is the phase wise investment plan for semiconductor fab project? How are you planning to fund this project?
We need an investment of Rs 25,250 crore in 6-7 years time frame. Large percentage of this investment will go in equipment purchase. We are asking our suppliers to provide proposals with financing component. We are also talking to EXIM Bank,US and EXIM, Japan for funding of HSMC semiconductor fab project.

When are you planning to start wafer manufacturing facility in the country?
We plan to do ground breaking in December, 2013 and start manufacturing in 36 months say December, 2016. We have 2 modules of fab. Fab 1 with a capacity of 20,000 and fab 2 with a capacity of 20,000. If everything goes as per plan, the second fab will be up for production in the next 12 months.

Have you already finalized the site for the project. If yes, how big is the area?
In the last 3-4 months we had series of meetings with states like Andhra Pradesh, Maharashtra, Karnataka and Gujarat. Our baseline for semiconductor manufacturing site is Gujarat but we need to get the right package. The right package should include: land, water, power and financial incentives from the state government.

In terms of land, the company needs 1,000 acres as it will help in building electronic manufacturing clusters that can accommodate around 6-8 fabs and production units. In this case you need more land and much more planning. If you do not plan, the project cost will go up. There is enough land wherever you go. For fabs, oneĀ  need to also create social infrastructure since the facility is far away from the city and land is costly in city.

What are the benefits one is getting from government of India for setting up semiconductor fab in the country?
The government of India has taken the first step and industry has to take the next step so that India will be high on hi-tech development. The M-SIP policy and PMA is in place. The government has a policy of tax benefit for 10 years. Typically this industry works on 10 percent margins and 10 percent is very good number along with the tax concessions for building fab manufacturing in the country.

We have lost general manufacturing to China and in hi-tech manufacturing Indians are all over the world. Hi-tech manufacturing can we replicated if we stay focused.

How many people are you planning to recruit for this semiconductor fab in the next two to three years?
Our plan is to induct 2,500 – 3,000 people directly and around 20,000 – 24,000 people indirectly in the next two to three years. Our plan is to also get 100 people from abroad.

What’s happening on the marketing side and are you also looking at the export market?
Absolutely yes. Once you build the fab, you need to have customer contracts as it helps in loading of the fab. My team has been aggressively looking at the clients and working on it after shortlisting the clients. The sales cycle are longer and it takes around 18 months from start to finish from the customer point of view.

How are you planning to fund and what’s the next step?
Unless funding is in the bank it is always an issue. The first condition for any financial institution is the Letter of Intent (LoI). We are awaiting LoI from government of India. We are in touch with financial institutions for the last three years.

Government has taken the first step and now we have to perform. The semiconductor fab manufacturing is tied to electronic manufacturing and India needs it as the country has to take lead in hi-tech product manufacturing.

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