Even as demand for electronics grows, home-grown start-ups in the semiconductor sector are struggling for funds.
For Anoop Dutta, founder of EmuPro Consulting, the past five years in the Indian semiconductor space has been an ordeal, unlike the glitzy world of software exports.
The investments required are generally high, the payback longer, and it requires considerable domain knowledge and, more importantly, favourable government policies.
If one was to make a check-list, there are some tick marks — domain knowledge and, to some extent, Make in India are helping the sector. But there are significant cross marks too. “Funds is the biggest stumbling block,” said Dutta on the sidelines of the annual meeting of India Electronics and Semiconductor Association (IESA), the equivalent of Nasscom for software exporters.
“We could use with better client connects and market access,” said Jayakumar S, Partner - Engineering and Production, Rinanu Semiconductors. Semiconductor-related manufacturing has been the rallying point of both the UPA and NDA governments, who from time to time make commitments to set up semiconductor fabrication plans, referred to as ‘fabs’, which manufacture integrated circuits. But so far, only two fabs have come up — one in Chandigarh by ISRO and another in Gujarat.
Opportunities
The situation lends itself to irony, considering the fact that the Indian market for semiconductor components is expected to hit $32.35 billion by 2025, according to IESA.
To tap into this opportunity, many start-ups decided to pick up the gauntlet, driven by a mix of patriotism and a huge business opportunity, considering that the space is dominated by multinationals.
Interestingly, India imports about 90 per cent of its electronics components requirement, and while the government has talked about reducing it, not much has happened.
It is here that bodies like IESA need to take up the case for start-ups. IESA officials say that a team of 12 senior industry leaders collectively work to deliver on-ground activation for enabling innovation, investment and industry.
A closer look reveals that apart from Ashwini K Aggarwal, Chairman, IESA, the others include Vivek Sharma, Managing Director, STMicroelectronics; Jitendra Chaddah, Director - Operations and Strategic Relations, Intel India, and Rajeev Khushu, Director - Corporate Affairs, Texas Instruments — all MNCs.
The scales seem to heavily weighed against start-ups, and it is here that funds and market access become a big issue.
“We spend $20,000 for hardware and software, in addition to salaries of a dozen odd people, and spend at least for six years in designing, building and marketing a prototype,” Dutta said.
At the end of it, a product may need tweaking and, many times, market access itself takes a considerable amount of time. Many in the semicon space are visibly upset over VCs, which they feel are nowhere aligned with the vision of the government’s manufacturing vision.
“When they can invest $10-15 million in e-commerce or food-tech ventures, where many fail anyway, why can’t the same amount be spent on ventures like ours,” asks the founder of a semiconductor start-up, who has spent $500,000 from his own pocket for the venture.
In 2016, China accounted for 44 per cent of the global semiconductor industry’s total revenue of $339 billion, according to the Semiconductor Industry Association.
Sturdy hardware
Funding is critical for the sector as industry watchers believe that as connected devices become mainstream, the government faces a security risk. “Software can be hacked, but it is very difficult to hack into hardware,” opined Dutta.
So has the industry made this representation to the government? Start-ups say the issues have been flagged, but the government seem not to understand.
However, some initial steps have been taken. Karnataka IT/BT Minister Priyank Kharge told BusinessLine that an accelerator facility has bee sanctioned for 200 start-ups, and the government will provide considerable hand-holding in areas such as funding and access to government projects.