Why should you not set up Chip Fabrication Unit in India

1.Already there is huge global overcapacity in chip manufacturing. There is no way that we can compete with China. Besides, you can simply pick up what you want from Japan, South Korea and China. Setting up a fab means an investment of $2-3 billion. It is a highly capital intensive business.
2. The cost advantage that we have is in the cheap labor costs. But due to poor infra structure, the transportation and shipment costs are very high in India so that advantage is lost on us.
3. Each chip needs a customer. So, logically, you need to tie-up with the Nokias and IBMs of the world before building a fab. It’s like buying a Boeing 747-400. Unless you are full up on travellers, you will incur losses.
4. A quote from Vinod Dham - Better known as Father of the Pentium processor-

"When I was with Intel at Albuquerque in 1989 in a fab plant the size of a football field that was set up with an investment of $1 billion. We were working on the 486 chip, but it was not ready. Each day we lost $25 million. So, to ensure that the operators got practice, we used memory chips. All that was used to make key chains and earrings. We simply cannot afford something like that in India."

Well you see these are reasons enough not to set up a Chip fabrication plan in India.

Source - BusinessWorld