MosChip Technologies MD & CEO Srinivasa Kakumanu | TV5 Business Breakfast | 9 July 2024
Dil T.M.T., Swargaseema Sandalwood Forms and L.I.C. presents, Welcome back to business breakfast. In January of this year, this company shared Rs.90.
The closing price of last year was Rs.290. In the last few months, in just 7 months, there were 250% returns in a year. That is, MosChip technologies. So, defense, aerospace, power generation.
For many more years, the solutions for silicon are now primarily data centers, setup box manufacturing, smart meters, hand held devices, IOT applications. There are solutions for everyone. And these are the top foundries. Top Foundries is a chip manufacturing in the last 20 years.
TSMC, UMC, Global Foundries. Even with the last few years, they have been working together. We all know this. NVIDIA, world's most expensive and top wealth creator. NVIDIA is from this industry. And a fabulous semiconductor design.
Global leader. And Intel, Samsung, AMD, Micron. The last 5-6 years, many companies have created wealth. From an exciting space, we have a company based in Hyderabad. Everyone is proud of it.
Now, we all know about it. There is no problem with cars, medical electronics, and smart phones. There is no problem with chips.
So, from an interesting aspect, we have a pure play semiconductor design company. One of the MosChip technologies is M.D. and CEO .E.O. They are with us now in the studio. Welcome, Mr. Srinivasa Kakumanu Thanks for joining us this morning. Your company has a lot of news in this magical time.
Not just for the stock performance, but in the different news. One thing, I mean, even in these 4 news, the most important thing is the amount of money you get is 510 crores from CDAC. After that, Ministry of Electronics IT, MEITY, Design Linked Incentive Scheme can be approved for a smart meter IC. And, in 2023-2024, there is an improvement in the performance of the 297 crores revenues, 9.8 crores profits, they have also reduced it.
And, recent partnership with Tenstorrent and Risk-V Solutions and Risk-V Solutions and Risk-V Solutions So, what we can see in these 4 news is that the game -changer is the marketer and I am also the marketer. With CDAC, you have a high-performance computing chip design contractor. What is CDAC? There are many other design companies in the country. But, why is MosChip the high-end computing chip design? Good morning, Vasanth.
First of all, before I answer that, let me give a brief history about MosChip. If history is known, people will be able to In fact, it is a 25-year-old company. 25-year-old company.
It is not an emerging company. So, this was founded in 1999 and this was the first Indian Fabless Semiconductor Company that was started in India. Initially, we were actually doing products. So, the actual promoter Ramachandra Reddy? Yes, Ramachandra Reddy & Dayakar Reddy They both started it.
We produced I.O. Connectivity Chips. So, we actually developed and shipped them in millions. After 6-7 years of production, we ran into issues and then we basically switched our portfolio to design services. In design services, it continued since 2007. But, after moving into design services, the scale-up was getting more difficult. In 2016, investors and all the stakeholders started acquiring companies to build the capability and the capacity.
So, as part of those acquisitions they acquired two companies in 2018. First Pass Semiconductors and GigaCom. So, I was basically running First Pass Semiconductors. Me and my friend Giri Started it. We ran it for about 7 and a half years.
Back-end-design services, expert back-end-design services provided customers both in India and abroad. In 2018, we acquired GigaCom. After acquiring First Pass Semiconductors, I was heading as Semiconductors B.U.Head. GigaCom CEO has become MosChip CEO – Venkata Simhadri. So, in 2018, after we came on board, we actually made some strategic initiatives and we thought we will have to move up the value chain in terms of design services. In addition to design services, resource augmentation is required and the customer side will have to work in the project.
So, but what we actually thought is we would move away from resource augmentation kind of design services and bring managed services and a statement of work of the project and deliver it. So, in a way, you can actually call them as turn-key projects. So, what will you focus on and build capacity? Application-specific integrated circuits.
from resource augmentation design services, we will move into value -added services, managed services. So, in that, we will create value for customers so, as part of this intent, we also started actually helping our customers on the turn-key projects, where customer gives us a specification and we give them a working silicon. Those project will start or the kind projects will start.
So, that is basically the recent history of 2018, when it worked and if you look at the growth that we actually saw over the last 3-4 years, FY -21 loaned 105 crores of revenue from FY-24, we made around 294 crores, as you actually said. And that is like 3 times the growth of we got. In these 4 years, there is a good growth.
Yes. Why? Why are there so many revenues and profits? Why did not the ramp-up happen? One reason is when the design services are in business, scalability is an important thing. And also, I mean, you will have to actually provide value-added services.
If it is a resource augmentation, if you are actually sending your engineers to customer sites, and if you... You are only a manpower company. You are like a body shopping company. So, there is no scaling and the other thing is when I started my first pass semiconductor training institute, I started M-ISS So, for any design services company, for that matter, for any company, I think manpower, skilled manpower is extremely, extremely important. From the training institute you still have that training institute? Yes. MosChip Institute of Silicon Systems is the training institute.
And in the last 13-14 years, we have been able to train 2,500 students. And from everyone, we have hired 30-40% of our masters. So, training institute is the one which actually gives us... What are the training revenues in your turnover? Training revenues are pretty minor.
And we actually treat that as our R&D investment because it is actually helping our design centre to grow. So, basically in the last 4 years, we have turned the project to do. We have experienced it, our expertise and we have taped out quite a few chips. I mean if you actually look at the history, more than 200 ASIC Tape-out and most of those were done to TSMC. TSMC. TSMC Global Foundry Sanctioned , but majority of them were taped out to TSMC Foundry.
So, in the other way business is going on. We approach TSMC members and we need certain designs for some of our customers and to world members in two ways or only your requirements TSMC is going on. It is not the other way.
But TSMC we are a DCA member of TSMC. What that actually means is DCA is a design centre alliance. So, it is like an endorsement from TSMC. That MOSCHIP is a DCA member and I mean whoever actually wants to go to TSMC, they can go through MOSCHIP to get their chip implemented. So, that is one kind of an endorsement. So, that we basically got.
Not a lot of companies have this DCA. What we wanted to do was high performance computing process. Because the world is moving towards the fastest and super computing technology. So, there is a lot of HPC processor design.
How is it going to help MOSCHIP to get huge maybe financial numbers commercial numbers. As I said I mean as a strategic initiative we started focusing on the turnkey projects where we get a specification from customer and we deliver silicon to our customer. So, CDAC project code it actually falls into that category. And CDAC is I mean giving us the specification high level architecture and the consortium will have to actually design, develop, fabricate it package it, test it and bring it on an evaluation board and we have to deliver reference boards to CDAC. Where does the CPU work? Even HPC processor. Is it a CPU related processor or where does the Processor work? In high performance computing processor SOC.
To just give you some idea this chip is actually done using two chiplets. In one chiplet there are 48 CPU cores. It is not a single core.
And ARM Neoverse V2 is the core of what is used. And two chiplets are connected to silicon interposers. So, that whole thing is going to be one HPC processor SOC. Okay.
How expensive it is? We are talking about GPU. NVIDIA, GPU, AI chips are very expensive. Some say it is half a million dollars.
I think some of those I think NVIDIA chips basically cost around 30,000$, 40,000$. 40,000$, 50,000$ dollars. At one to be multiple numbers required, even now cloud infrastructure providers are also coming.
Right now we are actually focused on delivering the prototypes to CDAC and after validating all the applications CDAC might actually go into production. So, that is when we will actually decide. How much opportunity market size can be with this HPC processor? Right now, CDAC is actually focusing on using this chip for scientific research of national interest right now. Right now, I think that is the focus. But they might actually go even for commercial use also later.
Maybe import substitutes depends on the imports. So, this CDAC may give you this assignment. What is CDAC? CDAC charter under MEITY and national computing mission basically supercomputing infrastructure for India. I think that is the main objective of CDAC's formation. Okay. What they have been actually doing is We are 30 years old now.
CDAC is making supercomputers. Supercomputer infrastructure actually. So, what they have actually done is of the initial HPC processors inter-connect fabric software stack they have built it. Right now, I think CDAC is pretty comfortable with the inter-connect and the software stack. And now they are actually focusing on replacing the third -party processor with an indigenous developer.
So, the software part or even involved in hardware? We are actually developing the processor. Right? So, the third-party processor is going to be replaced. See, so far CDAC has been using third-party processor in their supercomputing infrastructure that is going to be replaced by the chip that we are developing for that. MOSCHIP is still a very small company in this field, chip design and feild. Now, we have a lot of things like AI chips. Like GPUs NPUs and other things like that.
They are developing very fast. When we look at Apple 16, its processing, speed or capacity is 100 times of an Airbus, an aircraft. In our hands, when we have a lot of processing with us, its capabilities are slightly lower. At one time, in this field, MOSCHIP has a lot of processes. Our strength has always been the ASIC design. Because we also did a lot of products and we have excellent expertise in software and system design as well.
You put firmware development and then the device drivers writing on it, application software writing on it, PCB design, evaluation boards reference boards are designed and bring up of the chips is something that we are actually miniaturization of the electronics, we have looked it up. How long have you been miniaturizing? See, I mean we have been actually helping our customers on realizing their ASICs. Again, I mean as I said specification is there, we are giving silicon to customers. So, and apart from silicon we also give them BSPs, device drivers, reference boards. So, we can provide end to end solution to our customers.
In the stock markets, there is a name for semi -conductor. Thanks to NVIDIA, whoever it is. In India, there are many semiconductor companies in India.
As I said in the introduction, we are seeing 500 PE. Our company, 50np is giving 500 PE and sharing it. How long has it been Again, I really don't want to comment on that. Talking about the market is not correct.
Most of the times, the valuation is actually dependent on the market sentiment, macroeconomic conditions and the future growth. What market would have actually seen is the way we grew, the kind of strategy that we have actually set up for ourselves and the way we actually executed it. That is actually reflecting in these two wins as well. So, the market we believe is actually looking at our future growth and probably what you call that is reflecting in the valuation. Maybe going forward, two years down the line, MosChip is going to be like this. So, the market is reflected in the valuation.
You too will outlook the company. For the next financial year, or the current financial year. If you look at over the last 3-4 years, we have been actually growing at a 35% CAGR. So, that is something organically we will actually grow.
And the CDAC project that has actually come to us should actually improve that growth rate, because that is going to be an added addition. And this CDAC project is actually going to put us in a different orbit is what I actually believe especially on the ASIC turnkey business. And this is a very complex chip and this is being done in 5 nanometer technology. And success of this chip is actually going to give us or make us win lot of ASIC turnkey project. And that is what is going to actually take this company forward and upward. That is one.
And the other thing is, because MosChip actually started as a product company and a couple of years ago, strategically we thought we would I mean apart from doing design services, value-added design services, we also wanted to do some products. That is when we actually took up this smart energy Meter IC And smart energy matrix development DLI application pattern is done. Is this already designed or still under the design? It is in progress I mean we actually started I think it will be production ready in sometime in 2026. Oh this sometime Yeah, absolutely. It will take another 2 years. What is the potential for these smart meter chips? Yeah, we are looking at the projections.
In India 60 million ICs are needed. Smart energy matrices. That is the estimation. As often they are all imported.
They are all imported. Absolutely. And globally 2 billion units are needed for 2028. Okay.
And this is a growing market. Growing market. Excellent opportunity for MosChip and other companies in India as well as globally.
Here we interact with our analysts. Mr. Kutumurao also listening to your conversation. How do you see MosChip journey? Just one thing.
You said 500 PE is not even 900 PE actually it is MosChip. And price to book is extremely pricey 20. Duty lies in the eyes of the whole London.
Even in the English community, there is a stock. That is what we know. I will ask 3 subsidiaries. 100% subsidiaries from MOST chip company.
One of the subsidiaries from MosChip company has contributed 55 to 60 crores in last financial division of turnover between Indian entity and foreign subsidiaries in the next 2 years. Last time company took off. Inorganic exhibition was done.
Then maybe we can talk about it. Last year we acquired software based company. It is headquartered in US. They have offices in Ahemedabad & Pune. From software revenue is 9 months.
And basically the reason for acquisition is MosChip has been strong in silicon engineering which is semi-con. We really wanted to get an impetus to push right to that BU. We basically invested in acquiring Softnautics. Softnautics has actually brought in very good customers. Right now integration and consolidation have been completed. We actually believe that integrated entity with our software and systems BU is actually going to give us fruits in the coming years.
Ramesh Damani is a market investor who has taken Shares in MosChip Shares in MosChip Officially not from MosChip Maybe they have purchased it from the market sir. What do you see? As a family 500-600 and more market investors are coming. What could be the reason? I think one of the main reasons is the industry and the kind of push the government is also actually giving. As you know in 2022, 76,000 crores incentive practitioners government of India. If you also look at the PLI and DLI schemes after that the kind of investments that are actually coming right now Tata electronics. How much incentive do you have in DLI? What is the incentive that you get? The estimated cost is 50% or 15 crores whichever is ceiling limit 15 crores.
When are you coming? This is a milestone based execution. After completing a milestone you have to show a tangible output. There is an audit committee. After the audit committee, they release funds. How much do you do? How much do you make? You can do it for innovation you can do it for design.
I think a part of it is actually going to be capexed as part of this execution and some of these details we did not actually make it public and hence I really want to reserve my comment on that. Mr. Kranti any questions for Mr. Srinivas rao? Mr. Srinastru, good morning. Good morning.
Mr. Kranti, Mr. Srinivas rao, how much revenue do you have to show in the next second? What would be your margin profile? We did not announce next year's earnings publicly Just a few minutes ago Mr. Vasanth said if you look at it we have been growing at 30 to 35% CAGR over the last 3-4 years that is something that you can actually expect us to grow and to this the CDAC revenue is also going to be added for about 9 months or so.
I think that should actually give an idea about how much we are actually going to make. Coming to profitability and because I mean we are a growing company and we also started making strategic investments to build the capacity and capability then we only intend to build a bench in our building and we have always been saying for the upcoming projects we are actually building a bench and that bench is going to be really helpful to execute CDAC project. 10 to 15% bench in one term. And because of that reason our profitability margins may be pressured. And we believe this is actually short term in the long term we will actually improve on the margins and we constantly look at permitting.
Basically to execute any project we need to have a senior mid-level and junior kind of a combination and if that pyramid is skewed then either project is going to suffer or the profitability is going to suffer so that pyramid is something that we always try to optimize it and optimize the cost so that the bottom line is going to be improved. You have around 9% on an average 9 to 10% operating profit margin so going forward will it improve? I mean we are actually working on optimizing our cost and I am actually hopeful that in the long run things are actually going to improve. You know Srinivas rao, what we have to say is that silicon is getting prepared from the Sand it is a silicon dioxide pure silicon of course it They extract Pure silicon from the sand and pure silicon is cut it into metal and make it into chips and then manufacture it I think it is going to be a lot of process in lithography process when we have so much silicon why are we in this silicon design why are we following it what is hampering the progress? Actually in R&D we are pretty strong if you look at the stats 20% of semiconductor professionals are working out of India 20% of semiconductor professionals globally are working out of India that is tremendous number but all these people are actually working for MNCs they are working on ICs or IPs or whatever SOCs that are actually owned by MNCs and that is slowly changing I mean because of the push from the government or the incentives or the encouragement do you think the PLI scheme is working well for our design companies I mean I think manufacturing is going to start and that ecosystem is actually building there are a lot of CTS program and a lot of startups are actually coming and the companies are actually doing chips and for the chip design and the implementation the cost of the EDA tool it is going to be very expensive so government is providing the EDA tools through a grid so that is going to be an encouraging factor for these startups Tata fab I believe in 2026 I think the first chip should come out from Gujarat 50,000 waifers per month that is a good capacity but this is still going to be in 28nm but there are a lot of chips that can be done in 28nm we need to start production I think that is the dream I am sure we will actually get there but we are it is huge 96,000 crores are being invested in 28nm for a mission I don't know how much is needed for lithography so we will definitely make progress in India definitely Mr .Kutum rao I think when we were talking about Rs.80, Rs.90 and told everyone to buy MosChip at that price, now we are looking at Rs.300 what is your target for the next 1 year from the experience that you have what is your idea for it I don't know what is the target the developments in the company the developments in the sector we will talk about it when we were talking about it was the time when the company made a very good equation and which the growth of the company when we were talking about preferential pricing the equity the pricing valuation many things were suggested one confidence that investors should come in fast-growing companies they will require funds but still when they start paying dividend that inspires confidence in them one thing Mr.Srinivas if not in 24, 25, 25, 26 we are expecting the dividend It is two rupees paid up share.
I think the valuations will shoot-up And the real trust and we factor on it at higher levels, late game investors too, trust factor on it will develop. If at all, at long two-hour developments is anything, maybe stock can go to even 500 plus in the future. Okay. Srinivasa rao, we have a 500 plus target in our minds for MosChip What are you? This target, me, of course, you share price, sometimes targets should not be given, it is not necessary. But I think your financial performance will be a target for this. Yeah, what I can actually assure is, The company has actually built strong foundations to basically execute well on the path that we have set for ourselves which is transforming this company into an ASIC turnkey kind of a company, right? Executing CDAC project successfully and delivering it will definitely actually help us win a lot of turnkey projects of that complexity and that is only going to actually take this company, what you call, upward and forward.
Okay, this is going to be a case study for all the future projects Yeah, exactly. Okay, good. Wishing you all the best Mr. Srinivasa Rao & lot of telugu investors have invested in MosChip. Wishing MosChip, All the Best!
2024-07-17 00:42
