Flextronics picks up minority stake in SemIndia

Electronics manufacturing services provider Flextronics is
picking up a minority stake in SemIndia Inc. Under the agreement between the two
firms, Singapore-based Flextronics would set-up a chip manufacturing facility in
Hyderabad and will become a preferred manufacturing partner for SemIndia Inc.

SemIndia works with Advanced Micro Devices (AMD), Inc and
Government of India (GoI), Government of Andhra Pradesh and India Semiconductor
Association (ISA). Under this strategic partnership, Flextronics will
manufacture electronic components and products for SemIndia and the latter will
manufacture semiconductor chips for the various product categories that
Flextronics manufactures in India.

These include chips for cell phones, set-top-boxes and PCs
among others.

According to an ISA and Frost & Sullivan report, the
total market for semiconductors in India will be over $40 billion by 2015. Peter
Tan, President and MD, Flextronics Asia said, "We are confident that this
partnership will result in significant benefits to Flextronics' overall
business in India. Our partnership with SemIndia builds on our existing
multimillion dollar investments in the country and reaffirms our steadfast
commitment to the India marketplace and reiterates our aim to further advance
the electronics manufacturing industry in India."

Dr Vinod K Agarwal, Chairman of the Board, President and CEO,
SemIndia said, "We want to project India as a world class production center
for electronic products. This project has been successfully managed to bring
together all components of the ecosystem in India, which include semiconductor
technology, semiconductor chip manufacturing, systems manufacturing and
investment and policy initiatives/incentives commitment from the central and
state governments necessary for doing semiconductor and electronic products
manufacturing in India."

The total cost of the project is $3 billion, out of which $1
billion will be raised from equity, while the rest would be raised in the form
of debt, loans, etc. Out of the $1 billion equity, GoI has an equity
participation of $250 million, strategic partners will put in another $250
million, while the rest would be raised from private equity.

Giving an update on SemIndia, Agarwal said, "In phase one, we plan to
establish a semiconductor Assembly-Test-Mark-Pack (ATMP) plant with an
investment of $100 million. This plant is expected to start very soon. We will
then raise equity of about $1 billion to start the chip manufacturing
facility."

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