Infineon: Born in Germany, Serving in India

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Vinay Shenoy, MD, Infineon Technologies India

Germany based Infineon Technologies has had a double-digit growth rate in India for the past five years, and plans to grow at a similar rate for the next three years too. To do so, the company will focus on the unorganised electric two-wheeler and three-wheeler markets in the country, as well as on inverterisation in the power industry and the Internet of Things (IoT).

By Abid Hasan

Infineon Technologies, the Germany headquartered semiconductor company, is in investment mode in India and participates in at least 20 events every year apart from conducting its own technology workshops. The firm is quite active in the automotive sector. In India, Infineon is looking to support the two-wheeler market with the help of local players while the four-wheeler market is predominantly handled by its international subsidiaries.

Charging towards the electric route

The semiconductor solutions provider is keen on tapping the electric vehicle (EV) market which is gaining momentum in the country. Being a globally strong player in the EV and battery management market, it is specifically planning to tap the Indian market for three-wheeler e-rickshaws, which is highly unorganised and currently being catered to by Chinese kits.

“We want to make use of the ‘Make in India’ opportunity and work with some startups and established design houses with good design capabilities,” says Vinay Shenoy, managing director, Infineon Technologies and the force behind the company’s massive success in India. He is also planning the company’s expansion strategy in India.

The evolution of the local electronics ecosystem will take some time.

As part of its strategy, Infineon is working with companies that have ready-to-go solutions to manufacture e-rickshaws. It is working with smaller companies and startups to make this happen in India. The company also plans to develop an Indian ecosystem to help procure electronics at attractive price points. “These design houses and products can displace the Chinese imports,” says Shenoy.

At the next stage, Infineon is planning to focus on electric two-wheelers. Though Shenoy feels that this market is at a very early stage of development, Infineon is in talks with OEMs that are into electric two-wheelers.

“We are working directly with OEMs to make two-wheelers—we are not only selling components but also developing ready solutions. We are working with local design houses, and then taking them to various manufacturers and promoting their solutions,” says Shenoy.

Make in India: When?

The government is going full steam ahead with the ‘Make in India’ initiative and has been running various programmes since the last few years, inviting global companies to come and manufacture in India. The programme has seen some positive responses but the electronics manufacturing industry is still lagging behind when it comes to making in India.

Shenoy feels that making chips in India is still a very distant dream. “The only thing we can enable right now is for our customers to make in India and our customers’ customers to buy from India,” he adds.

The company is enabling its customers to compete with the Chinese products. Over a period of time, it plans to help them to move upstream to produce everything that is made in India and become competitive so that Chinese imports are no longer viable.

The bottleneck

Semiconductor companies are still shying away from manufacturing in India and the reason for this is taxation. “Semiconductors serve the global market. There is no inherent advantage of semiconductor manufacturing for the local market. The government has imposed some very big hurdles such as import duties, which are very high. The evolution of the local electronics ecosystem will take some time,” Shenoy points out.

In the automotive industry, most of what is manufactured in India is also sourced here. This is yet to happen in the semiconductor industry. It’s also one of the reasons most international semiconductor firms are not setting up their foundries here. Citing one more reason, Shenoy says, “The capital investment is very huge—it requires US$ 3-4 billion for every fabrication unit; so various factors are looked into by potential investors before choosing a manufacturing location.” Infineon already operates in multiple locations across the globe so the company needs a very strong reason to choose a new location. In the next five years, Infineon will start evaluating India as an option for semiconductor manufacturing.

The government is promoting India as a manufacturing hub, but there is a perception that its policies are still not conducive for global players to manufacture in the country. When asked if the government policies are contradictory to its ‘Make in India’ slogan, Shenoy replies, “No, I don’t think there is any mismatch in government policies. Today, the government has put enough money on the table to attract manufacturing into this country. The policies are on paper, and well understood when they are well communicated.”

Shenoy feels that it is not the stability of the government or the policies that are an issue, but that the implementation of these policies is lagging at the state level. He points out a mismatch between state government and central government policies. “The state governments must be mature and supportive. Some states are supportive and forward looking, while others are yet to catch up. Policies are effective and the government has done enough; it’s a matter of time before things start happening,” Shenoy adds.

We see lot of interest in the industry to move towards electric vehicles.

In order to leverage the current policies to the maximum extent possible, both the state and central governments have to be in mutual agreement, and only when this happens can the country start attracting investments. FDI in electronics manufacturing is continuously increasing and what has come in is quite significant.

Betting on the upcoming EV boom

With the government making its stand clear about replacing all cars with EVs by the end of 2030, Infineon is looking at the EV market as an important opportunity to cash in on.

“Whether it is achievable or not is debatable. But we see a lot of interest in the industry to move towards electric vehicles,” says Shenoy.

Shenoy feels that the government is procuring electric vehicles to prove the viability of the solution. This push for electric vehicles is also creating an ecosystem for everything related to EVs. Apart from getting EVs on the road, it is creating the demand for a charging infrastructure, giving battery manufacturers a boost.

According to Shenoy, “The ecosystem develops when there is volume, and the government is doing an excellent job on that front.” Once the ecosystem for electric four-wheelers is in place, it can be replicated for three-wheelers and two-wheelers. He believes this is a path-breaking move, adding that, “Once we make this successful, the offtake in the market will be instant.”

In order to get the most out of the electric vehicle ecosystem, Infineon has set itself a high benchmark. The German company will bring in its global partners to India and develop startups and Indian companies.

My next investment destination will be in India and I am confident that this will happen sooner than later.

Infineon has had a double-digit growth rate in India for the past five years. And with India becoming an emerging market for EVs, the company is expecting a good amount of growth from this sector. When asked what kind of growth he sees for Infineon with the EV market set to boom, Shenoy replies, “I can safely say that our growth rate in India should continue to be in double digits for the next three years. The global semiconductor market is growing in single digits and consumption is increasing. I would say double-digit growth and double the international semiconductor growth rate is what we expect in India.”

The year so far

Last year has been good for Infineon and the company is focusing on three major sectors—automotive, power and security. The company is seeing opportunities everywhere. In automotive, the company will continue to develop electronics for two-wheelers; in power, it will go in for the inverterisation of home appliances and for UPS inverters; and in security, IoT is the key focus area.

When asked about India’s contribution to Infineon’s global revenue, Shenoy replies, “Currently, we are contributing in single digits, but it is purely a function of how soon manufacturing of electronics begins in India. We can sell components in India only when we make in India.” Infineon’s global revenue was approximately US$ 8.15 billion for 2016. But Shenoy feels that these numbers have less significance currently, since the organisation is in investment mode and will continue to invest in the market even if it continues to contribute by only single digits.

Shenoy mentions that, in China, most of the companies were experiencing just single-digit growth rates for a long time. The inflexion point arrived once the government changed its policies and the incentives got attractive. The industry then grew at the rate of 30-40 per cent every year for the next 10 years. “In China, everything clicked at the same time—policies, investor confidence and stability. Once infrastructure builds up to the inflexion point there is no reason why this country cannot replicate what happened in China; the question is when?” says Shenoy.

Indian companies are waiting for the inflexion point and the sooner it happens the faster they can grow. “We are hoping that it will happen next year. My next investment destination will be India and I am confident that this will happen sooner than later,” adds Shenoy.

Immediate investments

Infineon is betting big on India. Its investments are growing—in research and development, marketing, promotions and employees. According to Infineon, it spends around 7-12 per cent of its total sales on R&D and, compared to other multinationals, the company is investing a lot of its revenues in India.

“We are in an investment mode and not in harvest mode; so we will continue to invest for another five to ten years in the country because, at the end of the day, this country can be as big as China,” says Infineon’s MD.

India is in the spotlight for Infineon, and the company is leaving no stone unturned to make every opportunity big. Earlier this year, the company expanded its R&D space in Bengaluru to further strengthen its competence centre for hardware design and software development.

The company has also entered into an agreement with the India Electronics and Semiconductor Association (IESA) to support the Electropreneur Park (EP) at the University of Delhi, giving a major boost to the ‘Make in India’ and ‘Start-up India’ initiatives. Infineon will work with startups incubated by EP, offering business and technical consultation as well as mentoring. The company is preparing for all the current and future demands in the Indian market but, as of now, the ball is in the government’s court, and the latter’s next move could be a game changer.

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