IT cos upbeat on semicon biz

Many IT firms and engineering services companies have acquired semiconductor firms for filling the gap in capabilities. Infosys’ acquisition of InSemi should be seen in that context. Given the growth prospects in semiconductor space, many more such M&As are likely - Pareekh Jain, Founder, Pareekh Consulting, tells Bizz Buzz

Acquisition Spree

• Infy announced acquisition of InSemi for Rs280 cr
• HCL Group tied up with Foxconn for setting up OSAT plant
• Many IT and engg services firms acquired several semicon design firms

Bengaluru: Indian IT firms have started betting big on semiconductor space in their bids to cash in the emerging opportunities apart from diversifying their businesses into new areas. Recent announcements of tie-ups and acquisitions indicate that IT companies are keen to develop capabilities in the chip design and development stage as investment in the semiconductor space touches new high.

Recently, Infosys has announced that it would acquire Bengaluru-based semiconductor design and embedded firm InSemi for Rs280 crore. InSemi offers end-to-end semiconductor design services with expertise across electronic design, platform design, automation, embedded, and software technologies. This acquisition is expected to strengthen the capabilities of Infosys engineering R&D capabilities.

“Many IT firms and engineering services companies have acquired semiconductor firms for filling the gap in capabilities. Infosys’ acquisition of InSemi should be seen in that context. Given the growth prospects in semiconductor space, many more such M&As are likely,” Pareekh Jain, an IT outsourcing advisor & Founder of Pareekh Consulting, told Bizz Buzz.

While companies like Infosys are acquiring key semicon capabilities through acquisition, conglomerates like HCL Group are trying to diversify their businesses through presence in the semicon supply chain.

Recently, IT conglomerate HCL group has tied up with Taiwanese contract manufacturer Hon Hai (Foxconn) to set up an outsourced assembly and testing unit (OSAT) for semiconductor chips in India.

An OSAT facility provides third-party chip packaging and testing services to semiconductor fabrication units. Both fabless and chip-fabrication companies outsource chip testing and packing services to such units to save costs.

HCL Group has said that it has a strong engineering and manufacturing heritage and this collaboration is an opportunity that provides strategic adjacency to the Group portfolio.

“HCL Group has a strong hardware legacy. The company also has a strong engineering practice. So, such tie-up reflects HCL Group’s keenness to diversify their portfolio. Moreover, India is witnessing huge interest in semicon space as the country initiates steps to be self-reliant on this key asset,” said Jain.

The world faced a severe demand-supply mismatch during the pandemic as demand for tablets, computers, mobile handsets and others witnessed a huge surge. Supply disruption from China due to the pandemic aggravated the situation.

Currently, the global semiconductor industry is dominated by the US, with a 47 per cent market share in the total sales, followed by South Korea, Japan, and Europe. Despite being a large consumer of electronic goods, chip manufacturing capacity in India is dismal and depends heavily on China. India’s dependence is due to heavy imports of cellular and electronics products from China in which chips are embedded.

India is taking aggressive steps to set up chip manufacturing bases in the country. It has announced Production Linked Incentive (PLI) Scheme for attracting large scale semiconductor manufacturers. As part of this effort, US-based Micron Technology has started construction of $2.75 billion semiconductor facility in Gujarat.