SemIndia focuses on broadband gear as Fab City project delayed

SemIndia focuses on broadband gear as Fab City project delayed

Bangalore/ Hyderabad: Hyderabad-based SemIndia Systems Pvt. Ltd, a unit of a company with plans to make semiconductor chips, intends to start making next generation wireless routers and other home computer networking equipment by the first quarter of 2008 and follow it up with high volume production of low-cost direct-to-home and other television set top boxes two months later.

The electronics manufacturing plans—the company already makes digital modems—come at a time that the company’s parent, SemIndia Inc., awaits the readying of a chip fabrication facility, which has been delayed since its announcement in 2005.

The manufacture of so-called WiMax customer premises and home networking equipment is aimed primarily at the domestic market. “We have (received) orders worth over $70 million (Rs275.8 crore) since April this year. We are leveraging the high-volume demand of broadband products in India," said B.V. Naidu, managing director of SemIndia Systems.

The SemIndia group is an integrated semiconductor company comprising SemIndia Systems that focuses on end-user products, SemIndia Fab Ltd that will be engaged in chip fabrication and ATMP (short for assembly, testing, marking and packing) services, and SemIndia Fab City Ltd, which will set up the infrastructure and industrial park for the semiconductor manufacturing facility.

“While waiting for the chip assembly and testing facility to come up, we thought of creating a demand for (broadband) chips and chip vendors," said Naidu. While the manufacturing partner has not been decided for these products, the firm is talking to four potential customers in India and two potential buyers overseas.

Since March, SemIndia Systems has manufactured 1.5 million units of what are called ‘ADSL2+’ modems, a device for broadband connectivity, with its electronics manufacturing partner Flextronics Inc. By expanding its broadband product portfolio, SemIndia aims to sell its ATMP services to broadband chip vendors, such as Broadcom Corp., Centillium Communications Inc., Conexant Systems Inc., and Infineon Technologies AG. The company hopes to touch revenues of $150 million this fiscal year.

Semindia is looking to set up a $100 million ATMP facility within the proposed $3 billion Fab City at Hyderabad. The construction of the ATMP facility is expected to be completed by August and it will take another four to five months to be functional.

While the Andhra Pradesh government was to initially pick up an equity stake of 11% in the Fab City project and SemIndia promoters and strategic investors the balance 89%, the ownership has since been flipped. The government now owns 89% and has offered 11% to SemIndia and its strategic investors.

The change was prompted by apprehensions that other chip makers keen on setting up projects at the Fab City may find it difficult to come in with SemIndia, the developer, said the chairman of Andhra Pradesh Industrial Infrastructure Corporation, B.P. Acharya. The 11% owned by SemIndia, said Acharya, “will come down further as and when further companies come in. If big players come in with over $1 billion investments, we will dilute our stake." SemIndia chairman Vinod Agarwal earlier this year announced that three equity investors—Flextronics, Xalted Networks and Sandalwood Partners—had invested in the project, but declined details.

Sandalwood Partners managing partner Bob Kondamoori had then said that close to $30 million funds required as equity for the ATMP project were already committed by his firm and its associates and about $10 million, already invested.

Tessolve Services Pvt. Ltd, a provider of testing and other services to semiconductor companies, is also in contention for setting up a $200 million ATMP plant in Hyderabad’s Fab City. It announced the project last February.