NEW DELHI, March 28: India’s Hindustan Semiconductor Manufacturing Corp (HSMC) said on Wednesday it would invest up to $4.5 billion to build two chipmaking facilities in a licensing tie-up with leading German chipmaker Infineon Technologies.

Hindustan Semiconductor will use “leading edge” process technology under licence from Infineon Technologies AG in its products, according to a statement by the two companies outlining their signed memorandum of understanding.

The first plant “will require an investment of approximately $1 billion and will produce chips on eight-inch wafers. The second will be for more advanced 12-inch wafers requiring an investment of $3.2 to 3.5 billion,” the statement said.

The agreement between the two companies will “help build a foundation for the production of integrated circuits for mobile phones, identity cards and automotive products in India for the Indian market,” the statement said.

Wednesday's announcement came soon after India announced a semiconductor policy providing subsidies and tax breaks for investors setting up chip manufacturing units in India.

India is currently a negligible player in semiconductors and the policy aims to put the country on the global semiconductor map.

“This move will further strengthen Infineon's position as a leading player in the Indian semiconductor market where it has been active for 10 years,” the statement said.

“By bringing our process technology to the Indian market, we help build the foundation for the production of integrated circuits for the Indian market in the years to come,” Infineon chief Wolfgang Ziebart said.

No decision was announced on where to locate the project.

India's IT minister Dayanidhi Maran said domestic demand for the semiconductors “is projected to reach $36 billion by 2015 riding on the booming electronic goods manufacturing in India.” The rise is thanks to surging demand for consumer electronics, wireless communications and automotive products in an economy growing by around nine per cent.

The semiconductor market now stands at $3.25 billion.

“Most of the Infineon products have large market potential for India. This is in line with my vision for the semiconductor industry,” Maran added.

Last year SemIndia, promoted by a consortium of non-resident Indians, announced a three-billion dollar investment to manufacture semiconductors in the southern information technology hub of Hyderabad.—AFP