Story by Danish Khan•
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Kaynes Semicon scouts for global talent in chip assembly, says Centre’s nod for OSAT ‘very soon’
© Moneycontrol
The semiconductor arm of listed entity Kaynes Technology – Kaynes Semicon – has plans to attract top talent in chip assembly from Malaysia and The Philippines, CEO Raghu Panicker told Moneycontrol in an exclusive conversation. The company is expecting Centre’s nod for its outsourced semiconductor assembly and test (OSAT) unit in Telangana very soon.
Kaynes confirmed that it has started securing customers that will be served from the Telangana facility and once there is demand, it is open to exploring other states for similar units.
The company plans to differentiate itself from other OSATs in India with its R&D and engineering investments, CEO Raghu Panicker said, and is soon planning roadshows overseas to attract top talent from the OSAT industry.
Edited excerpts.
What is the current update on the OSAT? When is the government's approval likely?
The government is progressing very well in approving the OSAT. It should come in at any point in time. The whole thing is that all budgets are approved in various segments of the approval process. It is MeitY-approved. There is no doubt that this will be approved. We have been given a commitment that this is going to start. And from that effect, we have started recruiting for the last four months. We already have over 25 members of the team, including expats. We have three customers aligned and three request for quotations (RFQ) in place. We started talking to two local customers about how we can collaborate with them from an OSAT standpoint. The government is doing its best effort. It is on the right path.
How is the construction progressing in Telangana?
The construction is going on pretty well. It is 30% done and will be operational in the next two quarters.
Have you increased the investment corpus for this facility?
When we announced this in October-November, we were going ahead with a certain technology and a certain technology partner. As we moved ahead, we realised we should also look at advanced packaging technologies. We discussed this with the government, and they also understood that other than doing wire-bond technologies with legacy, we should look at advanced technologies like co-package optics, and in the co-package optics, we are putting a silicon-to-systems story. It’s a product story itself. We are doing high-end OSAT for co-package optics. It necessitated us to increase the budget and the approval within ICM to increase and bring in a new technology partner to look at new products. This increased the corpus, which is now Rs 4000 crore.
Which are the three technology partners?
We have three technology partners—Globetronics from Malaysia, Aptos Tech from Taiwan, and AOI from Japan.
All three bring in different technologies that are less complex, medium complex, and high-end. The government has liked that we’re not focusing on less complex wire-bound, where the margins will be lesser, but we’re also putting together parts to get the high-end packages.
How many assembly lines would you start the production with, and what sort of capacity are we looking at?
A total production of 13 assembly lines will churn out nearly one billion devices.
Which sectors are you planning to cater to through this facility?
We focus on automotive EV, industrial and high-performance computing (HPC).
We are predominantly an EMS company, meaning we do a lot of work for EVs and supply modules. For industrial customers in the fan market, we supply BLDC (brushless DC motor controllers) and then manufacture servers for C-DAC (Centre for Development of Advanced Computing, operating under MeitY). We understand these three industries very well, the nuances and what kind of semiconductor goes there. Hence, we would know what kind of semiconductor packaging we need.
The government is progressing very well in approving the OSAT. It should come in at any point in time.
Have you already secured those customers?
We already have three customers secured and there will be announcements soon. These are long-term customers for us who would run capacity customers and take dedicated lines. We are the first ones to say that 30% of the construction (of OSAT unit) is complete, nobody else can claim that. We did a groundbreaking in October. Three customers visited the site and have looked at our due diligence. Out of three, two customers want to take a captive line from an OSAT standpoint. These are all excellent indications for us.
Everybody’s talking about automotive. It’s not rocket science, but can everybody have a market for them? That is tough. Everybody cannot take the pie of automotive. But then, we are an EMS company and know where the EMS modules go. Hence, we have chosen industrial and HPC as very high-growth areas.
Next month, we will start a roadshow in Malaysia and the Philippines to attract talent.
Could you give a split between domestic and international demand that Kaynes will cater to through the OSAT facility?
Our initial plan is to do 80-90% output for exports. Since we are an outsourced services company so our focus would be that. But, if you play there longer, you must be price-competitive and compete against the Southeast Asian companies. Hence, we have to look at a format or a technology where there is a decent margin, and that’s where our story of co-package optics comes in. In silicon photonics, the world over, there are only three players present.
We have a design IP and process IP residing in India and will do OSAT in India. We are doing a silicon-to-systems story and then slowly move up the chain to look at the domestic market
We manufacture the semiconductor, use it in EMS, and add our margin. We will remove the double margin which will lower the price of the equipment, be it a two-wheeler or products in the fan market. It will be cost advantageous.
Our initial plan is to do 80 to 90% output for exports.
Are you investing in R&D to support OSAT operations in India?
We have already created a seven-member R&D team. They form a core team for R&D for newer technologies and advanced packages. Customers don’t want to come if you’re just a manufacturing house, but they will show interest if you give them value-added engineering from an R&D standpoint and a technology centre.
ATE (automated test equipment) engineering and test suit development will be our differentiation, which other OSATs have not considered.
How do you plan to attract top talent for this?
We are hiring people. Next month, we will start a roadshow in Malaysia and the Philippines to attract talent. We have hired expats from OSATs in these countries. These are the territories that are good in OSAT. Although we are not saying we won’t go to Taiwan and Japan, we won’t get the advantage since everyone is there.
We have hired fresh engineers from Indian colleges undergoing a training program. Once the training is complete, we will send them to our partner companies and technology companies in Taiwan, Malaysia, and Japan to receive advanced training.
We have partnered with Perceptive Solutions, a startup with good semiconductor experience. We are working with them to put a Center of Excellence in Odisha on our packaging, and work with two or three universities. Universities will give us grants, and the government will put in some money and a small proto line to train students there.
We will do it in the next three to five years.
Do you think that there is a skill gap in India?
These are all challenges, but they are also opportunities. India has never had a semiconductor manufacturing ecosystem, so you must hire, train, and reskill people.
Are you looking at other states for similar facilities in future?
As we grow, absolutely. Like our EMS story, we started with Mysuru and have four facilities. As we grew, our customers necessitated us to go closer to them. We’re putting up a Pune factory keeping Tata Motors in mind. We have put a factory in Chennai because many automotive customers are there. We have factories in Manesar and Parwanoo (Himachal Pradesh) because many customers are there. So as our customer base increases and we do more capacity, we will look at places like Ahmedabad and Bhuvneshwar.
How do you see this OSAT as an ecosystem developing in the country?
It’s a five-year time frame for all of us to make it price-competitive with better margins because, after five years, we’ll be on our own. We have started looking at the investment we must make after five years, because it’s a long-term game for us. So we have to choose our markets and customers very carefully. In this, you will only have 10 to 15 customers and not more than that. We have to play our cards very carefully.
This interaction has been briefly edited for clarity.