L&T Semiconductor Technologies, a subsidiary of engineering and construction major L&T, is looking at acquiring 3-4 more companies to boost its $300 million (Rs 2,500 crore) chip design foray. The company recently acquired SiliConch Systems, a chip product company in power management, for Rs 183 crore. L&T Semiconductor CEO Sandeep Kumar, spoke with FE, about acquisition plans, market potential from chip design, customers in pipeline, as well as potential foray into fabrication.
Excerpts:
Q.What potential do you see for L&T Semiconductor in chip design?
A. Our focus is on the three sectors – automotive, industrial and energy. These three sectors are going through transformation, which is tied to they becoming software-defined systems from a completely hardware-driven systems. Segments like software-defined vehicles, smart grids, and Industry 4.0, have emerged, but semiconductor chips are still catering to the previous market (hardware-driven). New players have come up offering solutions which are needed in this changed market, so this is the right time for us to enter this segment.
Q.You recently talked about getting into fabs. Can you explain the product roadmap?
A. First we need to build a product. That’s what we are doing. In order to build a product, you use different IPs (intellectual properties) that come from different sources so that’s where the IBM IP comes into play. Now, we can build a processor product for a certain market much faster. If we had to create that same IP, it would have taken five years. And then, product sales comes and if we get large volumes that justify building a chip fabrication, we will build a factory. For us, these are sequential events and won’t happen parallelly. When we achieve a certain milestone or certain revenue (from designed chips), we go to the next step.
Q. At what point do you think it makes sense for you to get into building a fab?
A.We have to hit $1 billion in product revenue. We expect to reach that level in about seven years. The average selling price of these products is $1. So, if I need to hit $1 billion, I need to sell a billion devices.
Q. In the chip design segment, many companies are facing difficulty in finding customers. How are you approaching it?
A. Those companies will always lag. We are doing the other way around. Everything we are doing is after ensuring that we have a customer, then we build a product.
Q.How many companies have shown interest?
A.They are all big customers. We are not going after small players. We have signed up with six firms, and have another 20 plus in the pipeline.
Q.You recently acquired one company. Are you looking at other acquisitions to grow chip the design business?
A.We are looking at 3 or 4 companies. That acquisition was in the power sector. We are looking at acquisition in RF (radio frequency), in MEMS (Micro-Electro-Mechanical Systems), sensors and analogue. So we’re looking for acquisitions in each of the product vertical.
Q.What is the ticket size given that the last company you acquired, was for Rs 180 crore?
A.Ticket size depends on the company. It could be lower or higher.
Q.How much will the domestic market contribute to the business?
A. Around 10%. That’s the size of the market compared to rest of the world. Besides, we are focusing on all the regions globally including Europe, Japan, the US. Everywhere we have teams.
Q.Do you think the chip design linked scheme should be opened to large companies?
A.We are not depending on funding support. If we get it, it will be great, but our business and milestones are not dependent on any government funding. We are looking to source the funds from L&T.
From: financialexpress
Financial News
