Kaynes to keep away from fabs for now, focus on chip facility, says CEO

New Delhi: Kaynes Technology’s subsidiary, Kaynes Semicon, will focus on completing and scaling its chip assembly and test facility in Sanand, Gujarat, with no immediate plans to venture into semiconductor fabrication, according to chief executive Raghu Panicker.

“We’re right now focusing on completing our outsourced assembly and test (OSAT) facility that we’ve been approved for by the India Semiconductor Mission (ISM)," Panicker said in an interview with Mint.

“The plant is costing us ₹4,000 crore ($475 million) to set up, and this itself will take 18 to 24 months to complete fully and make it operational. Right now, we don’t have any plans to venture into a fab project, at least in the near term. We’ll start with chip manufacturing through OSATs, and then slowly see how we can scale up," he said on the inaugural day of Semicon India 2024.

On 2 September, the Centre formally approved Kaynes Semicon’s OSAT proposal. Once fully operational, the facility will produce 6 million chips per day in the next two years.

This was the fifth formal approval by the ISM under the Centre’s production-linked incentive (PLI) scheme for domestic semiconductor manufacturing. So far, the largest project is a greenfield chip fab being set up by Tata Electronics in technology partnership with Taiwan’s Powerchip Semiconductor (PSMC), which is tipped to become operational in 2026.

Barring this, India has also approved US memory maker Micron’s assembly, testing, marking and packaging plant in Sanand, Gujarat in June last year. The other two projects include Tata Semiconductor Assembly and Test (TSAT) Private Limited’s OSAT facility in Assam, as well as a second OSAT plant in Gujarat by the homegrown CG Power and Japan’s Renesas.

 

Kaynes’ OSAT announcement has worked positively for the company. In 10 days since the announcement, the stock has risen 12% to ₹5,135 apiece.

Kaynes Technology went public in November last year, listing at a 32% premium at the time. Its share price has increased nearly 7x since listing, and 2.5x in the past one year, driven by its growing electronic manufacturing market share.

“We have been expanding our electronics manufacturing services (EMS) play, and are a benefactor of the Centre’s new production-linked incentives (PLI) scheme for IT hardware. We’re locally making PCs for one of India's top five PC brands right now," Panicker said.

Also read | India to roll out fresh chip incentives package, receives US partnership

Tapping local market

The top executive further said the company is working with a mix of brands. “We currently have 30% domestic clients and 70% global firms. The local demand is expected to come from companies such as Ola and the likes. There is a good amount of business available to address within the local market from private companies, and that’s what we’re looking to tap into," he added.

Panicker also said that the company may look to tap the Centre’s ‘design-linked incentive’ (DLI) scheme for semiconductor design as well. “We will apply for the DLI scheme if we get into semiconductor design at some point. But, for now, we’re sticking with scaling up the OSAT plant and our EMS vertical, through which we’re now benefactors of two central PLI schemes."

Kaynes’ statement comes as India gears up to attract and approve more semiconductor projects. On Thursday, Mint reported that a new incentive scheme estimated to be $15 billion ( ₹1.25 trillion) has been pitched for Cabinet approval.

On Monday, Akash Tripathi, chief executive of ISM, said that approximately 20 fresh proposals are currently with the Centre for evaluation, and a number of these projects are expected to be approved in the near future.

If approved, they will compete with Kaynes, Tata SAT, and the CG Power-Renesas joint venture, all of which are seeking a slice of the country's chip testing and assembly market.

Also Read: Speedy execution holds the key to the success of India’s semiconductor thrust