Demand for chips remains strong despite global economic headwinds: Cientra CEO

Globally, semiconductor space is growing at a breakneck speed. All nations are scouting to have strategic control over semiconductor design, development and manufacturing given the geopolitical dynamics. This is supplementing the growth of many engineering solution companies across the world that are deeply involved with the government agencies and corporates in this space.

Engineering solution company Cientra is one such Indian company that is riding the growth wave. In a conversation with Bizz Buzz, CEO of Cientra, Anil Kempanna said that though global headwinds have some negative impact on business growth, the company is well-positioned to cash in the emerging opportunities in semicon, telecom, and automotive space in the coming years. The company, which has more than 600 employees, is also working with multi-national companies both within and external to India and government agencies in many critical areas. He also said that the company has developed many IPs (both in semicon and software) that help to provide customised solutions to its clients.

How is the overall market demand? We have seen the commentary coming from engineering services or solutions companies being better than the IT services firms. Can you provide a brief overview of what is happening in the industry?

Demand continues to exist. The question is whether it is high, medium or low. As you know, semiconductor is the hot commodity in the present world. They are calling it as the next oil. Having said that, we have seen many big chip companies doing layoffs. So, definitely, there is an industry slowdown. But the demand still exists. Especially, the need for consulting is high.

Here is a scenario when the demand typically goes down, companies typically don't want to hire full time employees till their business stabilises. However, they can’t compromise on the roadmap of primary products. And for such projects, they seek out consultancy help. This helps them to manage cost. Today, I believe that we are in a dip mode but it will recover.

While semiconductor space remains a high demand space, what exactly is happening in the automotive and telecom space? We have seen commentary on the telecom which is not so encouraging. What are your views on this aspect?

Telecom requires huge amount of investment and we have seen paradigm shift in the telecom space with roll out of 5G. However, the jury is out in terms of 5G roll out. Now, the countries are evaluating whether there is a compelling need to migrate to 5G when they are already on 4G. Countries which are not on 4G yet are evaluating possibilities of leapfrogging to 5G. From that perspective, telecom in India is quite attractive. So, I would summarise that there is a relative slowdown in telecom.

But on the automotive side, it is quite different. We went through the demand and supply mismatch with regard to automotive chips in past years. That has created a lot of awareness in all types of countries, be it in Western geographies or in developing countries like India. All become aware that all cars need semiconductors and supply delay will push the deliveries.

In Europe, which is the home to biggest automotive manufacturers, is going through the transition. The law now mandates that all automobile manufacturers need to do away with petrol and diesel vehicles from 2035. So, automobiles have to run on alternative energy vehicles. Therefore, all the legacy car or automotive manufacturers realise that they have to migrate to alternate energy-powered vehicles. That is the reason that we see a lot of push in terms of consultancy work.

Which is the biggest vertical for Cientra as of now?

So today, the biggest vertical is semicon with embedded software design. We continue to grow in that space. And we see a lot of opportunity and growth both in automotive embedded software and telecom.That is the opportunity and I am focussing that how Cientra can seize this opportunity. Out of the four verticals, semicon contributes around 60 per cent to our revenue. We are unique in the spaces, we are operating in.

Globally, Indian engineering services companies are gaining market share while many European firms are losing out. What are your views in this aspect in terms of gaining market share for Cientra?

I will not say that I am growing at the cost of others but I am complementing others. Earlier, there was a notion that delivery team has to be based on on-shore for implementing projects. Thanks to Covid-19, you don’t necessarily need to have all the people onsite. Even if you have minimum team size onsite, you can implement the project with people on off-site location. That sort of model has gained traction. This has helped companies like Cientra to grow faster.

Can you provide a brief overview about Cientra’s customer profile? Also, please provide some view in terms of geographical distribution of these clients like how many are in Europe and in emerging markets.

We have customers who are spread world-wide. Our customer profile comprises all big, mid-size and small ones. It’s a mixed profile. We have got big customers operating in semiconductor and software spaces. In the semicon space, we are doing active business with some of them. We have also signed up new contracts with some of them. You name a semiconductor company, we are there.

On the software side of things, we have got big auto OEM providers. We have good presence in Germany. We also have good interface with startups in the US. In India, we are focussed on government-owned companies.

Do you have any exposure to China?

We don’t have any exposure to China. We have shied away from those opportunities.

How many IPs do you have at this point of time? Can you provide some view on your investment on R&D?

We have got three different types of IPs that we do in Cientra. On the hardware side, we have silicon IPs. These are IPs that we can give to our customers, and they can use it. In the second bouquet, we have developed solutions, for instance in automotive space. We have developed these solutions inhouse. On the telecom side, what we have done is we have invested significant amount on a product that today connects the 5G core.In this space, we have done several partnerships.

What is the total employee count as of now? What are your hiring plans in the current financial year?

We provide nine-month training to our employees before putting them on projects. We have more than 600 employees. We invest heavily in our employees in terms training. That is the reason how we manage our attrition also apart from providing customised services to our clients. As far as onshore-offshore mix is concerned, around 90 per cent of our employees sitting on offshore. But we want to change the composition with more onsite presence. We are low on the operational cost as it is a mid-sized company. Our margins are good and we are cashflow positive. We are very sure that the market is going to recover in 2024 and we are well-positioned to cash in those emerging opportunities.