Infineon has signed a memorandum of understanding with the Hindustan Semiconductor Manufacturing Company to help create a ‘Fab City’ in India which will involve the building of ten fabs.

Others involved in the huge project are Siemens, MW Zander, the clean-room specialists, and US Liquids. Infineon’s contribution will be the provision of process technology, chip design capabilities and expertise in setting up new fabs.

“Fab City will have everything in terms of infrastructure, power, water and chemicals which the semiconductor industry needs,” an Infineon spokesman told Electronics Weekly. “One reason they have chosen Infineon is because we set an industry benchmark with our fab in Malaysia where we went from cornerstone to first wafer out in a year, another reason is that our process fits with the requirements of the Indian market.”

The first fab Infineon will help build will be a 200mm 130nm facility costing about $800m to be running by 2009. The second fab will be a 300mm 90nm facility. “The other eight fabs will be announced later,” said the spokesman. All will be announced by 2010.

The Indian government recently revealed a support scheme for semiconductor manufacturing under which the government pays up to 20 per cent of a project cost through equity participation, tax breaks or other financial incentives.

The reason why the Indian government is so keen on the semiconductor industry is because it expects sales of electronic goods to increase by ten times in the next ten years, reaching $363bn by 2015, for which the semiconductor content will be worth $36bn.

Either these goods can be bought from overseas or they can be made in India using Indian-built semiconductors. Clearly its better for India to do it locally.

Asked about Infineon’s motivation for getting into the deal, the spokesman replied: “They could build our products.”