The Management of your Company is pleased to submit the following:
The Global Semiconductor Industry:
The Semiconductor Industry Association (SIA) announced worldwide sales of
semiconductors totaled
$130.8 billion during the fourth quarter of 2022, a decrease of 14.3% compared to the
fourth quarter of 2021 and 7.2% less than the third quarter of. Global sales for the month
ofDecember 2022 were $43.6 billion, a decrease of 4.3% compared to November 2022.SIA
represents 99% of the U.S. semiconductor industry by revenue and nearly two-thirds of
non-U.S. chip firms.
Global semiconductor sales experienced strong growth in the first half of 2022.
However, there were indications of a slowdown in recent months, leading to a year-on-year
decrease in September 2022. This decline was the first since January 2020 and was
attributed to various macroeconomic challenges. Despite the short-term fluctuations, the
long-term market outlook for semiconductors remains positive. Semiconductors continue to
play an increasingly significant role in our digital economy, indicating continued growth
and demand for these components. On a regional basis, sales into the Americas market saw
the largest increase (16.2%) in 2022. China remained the largest individual market for
semiconductors, with sales there totaling $180.4 billion in 2022, a decrease of 6.2%
compared to 2021. Annual sales also increased in 2022 in Europe (12.8%) and Japan (10.2%).
Sales for the month of December 2022 decreased compared to November 2022 across all
regions: Europe (-0.6%), Japan (-0.5%), Asia Pacific/All Other (-3.4%), China (-5.7%), and
the Americas (-6.3%)
- Market Drivers
OSAT (Outsourced Semiconductor Assembly and Test) plays a crucial role in the
semiconductor industry by providing assembly, packaging, and testing services to
semiconductor manufacturers. Several market drivers impact the growth and demand for OSAT
services. Here are some key factors:
- Increasing Demand for Consumer Electronics: The growing demand for consumer electronics,
including smart phones, tablets, wearables, and other smart devices, drives the need for
advanced semiconductor packaging and testing services. As consumers seek more powerful and
feature-rich devices, OSAT companies play a vital role in ensuring the efficient assembly
and testing of these semiconductor components.
- Advancements in IoT and Automotive Technologies: The Internet of Things (IoT) and
automotive sectors continue to experience rapid growth. These industries rely heavily on
semiconductor technology for sensors, connectivity, and autonomous systems. As IoT
devices and autonomous vehicles become more prevalent, OSAT companies are essential for
providing specialized packaging and testing solutions to meet the unique requirements of
these sectors.
- Increasing Complexity and Miniaturization of Semiconductors: The semiconductor industry
is constantly striving for smaller, more powerful, and efficient chips. This trend toward
miniaturization and increased complexity poses challenges in assembly and testing. OSAT
companies specialize in advanced packaging technologies, such as wafer-level and 3D
packaging, to accommodate these demands while maintaining high levels of reliability and
performance.
- Shorter Time-to-Market: The semiconductor industry operates in a highly competitive
landscape, where time-to-market is crucial. OSAT companies offer quick and efficient
assembly
and testing services, enabling semiconductor manufacturers to accelerate their product
development cycles. By outsourcing these processes, companies can focus on core
competencies while relying on OSAT partners for fast and reliable assembly and testing
solutions.
- Cost Optimization and Flexibility: OSAT companies can provide cost advantages by
leveraging economies of scale in assembly and testing operations. Semiconductor
manufacturers can benefit from the expertise and infrastructure of OSAT providers,
avoiding the need for significant capital investments in their own assembly and testing
facilities. Additionally, outsourcing offers flexibility in scaling production capacity up
or down based on market demand, reducing overall operational costs.
- Semiconductor Industry Consolidation: The semiconductor industry has witnessed
significant consolidation, with larger companies acquiring smaller ones to gain a
competitive edge. This consolidation drives the demand for OSAT services as integrated
device manufacturers (IDMs) and fabless semiconductor companies outsource their assembly
and testing needs to specialized OSAT providers.
- Semiconductor Mergers:
There has been a surge of semiconductor M&As after 2020 for reasons such as
technology, capacity and resource expansion, geo-diversification, and resiliency planning.
Increasingly, companies are looking at M&As as a way to acquire not only the
technology and knowledge base but the human capital, talent, and expertise they need in
growth areas such as AI. This trend continued in 2022, especially in the second half of
the year. Some notable semiconductor M&As in 2022, some of which are due to close in
2023 are listed below.
Advanced Micro Devices - Xilinx
AMD announces the acquisition of Xilinx to expand AMDs portfolio in graphics and
adaptive SoC
products making AMD the new industry leader for high-performance and adaptive
computing.
Allegro MicroSystems – Heyday Integrated Circuits
Allegro MicroSystems has acquired Heyday Integrated Circuits, a privately held
company specialized in cutting-edge gate drive solutions that enable energy conversion in
high-voltage gallium nitride (GaN) and silicon carbide (SiC) wide-bandgap (WBG)
semiconductor designs.
Diodes Incorporated - Onsemi
Diodes Incorporated acquired Onsemis South Portland, Maine wafer fabrication
facility to help accelerate their growth initiatives in the automotive and industrial end
markets and to add 200mm wafer fab capacity for analog products.
Intel Corporation - Tower Semiconductor
Intel is acquiring Tower Semiconductor to help expand Intels manufacturing
capacity, global footprint, and technology portfolio to address unprecedented industry
demand. Tower operates a total of seven production sites across Israel, the US, and Japan.
The companys foundry capacity in 12-inch wafer equivalents accounts for about 3% of the
global total.
KYOCERA AVX - ROHM
KYOCERA AVX, a leading global manufacturer of advanced electronic components is
acquiringROHM Semiconductors tantalum and polymer capacitor business, including all of
its tantalum and polymer capacitor manufacturing lines and relevant intellectual property.
MaxLinear – Silicon Motion
California-based MaxLinear announced an agreement to buy Silicon Motion in Taiwan.
This acquisition is expected to be completed in the first half of 2023 and will add
controller ICs for NAND flash storage to MaxLinears lineup of RF and mixed-signal
products.
Micross Components – PAAL Technologies
Micross Components, a leading provider of high-reliability microelectronic product
and service solutions for aerospace, defense, and other applications has announced the
acquisition of PAAL Technologies, a leading provider of MIL-STD-1553 Data Bus Couplers,
Harnesses, and RF/Wideband Transformers. The acquisition further expands the Hi-Rel
Components portfolio of Micross, while providing customers of PAAL with single-source
access to the most complete offering of end-to-end advanced microelectronic services and
component, die, and wafer solutions.
Navitas Semiconductor - GeneSiC
Navitas acquires GeneSiC a provider and developer of Silicon Carbide and
Silicon-based high power semiconductor products helping Navitas diversify towards
higher-performance products.
Nexperia – Nowi Energy
Nexperia announces the broadening of its portfolio of power management products
through the acquisition of Netherlands-based Nowi Energy. Nowis technology allows energy
harvested from light, radio waves, or temperature gradients to be used in low-power
applications like smart wearables and autonomous wireless sensor nodes. The manufacturing
capacity and capability of Nexperia as well as its global infrastructure will ensure that
together, Nowi will be able to speed the production of these solutions enabling higher
volume production and shipping by the end of 2022 and early 2023.
Nordic Semiconductor – Mobile Semiconductor
Nordic Semiconductor is to acquire Mobile Semiconductor to bring specialized
embedded memory technology for microcontrollers and Systems-on-Chips in-house.
Renesas Electronics - Steradian
Renesas, a supplier of advanced semiconductor solutions, completed the acquisition
of Steradian Semiconductors a privately owned fabless semiconductor radar solutions
company headquartered in Bengaluru, India. The combination of Steradians leading-edge
radar technology and engineering
talent will boost Renesas sensing solution offerings in a wide array of applications
that will simplify
the design of automotive radar systems.
Vishay Intertechnology - MaxPower
Vishay acquired MaxPower Semiconductor a California-based fabless power
semiconductor provider with a substantial IP portfolio of over 100 patents. Maxpowers
proprietary device structures and process techniques provide leading-edge silicon and SiC
MOSFET products will be incorporated into Vishays MOSFETs portfolio.
- Outsourced Assembly and Test (OSAT) Industry
The global outsourced semiconductor assembly and testing market size & share
was valued at around
USD 34.85 billion in 2021 and is estimated to grow around USD 50.9 billion by 2028, at
a CAGR of approximately 4.8% during 2022 to 2028.
The increasing commercialization of technologies such as AI and 5G is driving
advancements in packaging platforms, including fan-out packaging and 3D flip chip
technology. These packaging solutions address the need for high-power consumption and
offer benefits such as improved chip connectivity. As a result, the demand for Outsourced
Semiconductor Assembly and Test (OSAT) services is expanding, particularly in emerging
regions, with Asia witnessing significant growth in semiconductor manufacturing. Countries
like China, Taiwan, South Korea, and Southeast Asian nations are becoming major markets
for OSAT services, leading to increased collaboration between companies and OSAT vendors.
To stay competitive, many OSATs, such as ASE/SPIL, Amkor, and JCET, are investing in
advanced System-in-Package (SiP) and fan-out technology. This investment allows them to
gauge the competition and enhance their market position. The growth of the OSAT market is
driven by the rising demand for consumer electronics and the rapid urbanization observed
worldwide. Developed countries are experiencing a transformational shift, coupled with
increased smartphone adoption, which further fuels the demand for electronics and drives
the need for OSAT services.
Additionally, technological advancements and the increasing purchasing power in
developing regions contribute to the growth of the OSAT industry. Since OSAT companies
dominate the IC assembly and testing sector, this provides ample opportunities for market
players to strengthen their position and improve their market share.
- The Indian Semiconductor Industry
The Indian semiconductor industry has been experiencing significant growth and
development in recent years. It plays a crucial role in the countrys electronics
manufacturing sector and contributes to the advancement of various high-tech industries.
Here is an overview of the Indiansemiconductor industry:
- Market Size and Growth: The Indian semiconductor market has been growing steadily,
driven by factors such as increasing domestic demand, government initiatives to promote
electronics manufacturing, and the expansion of the consumer electronics and automotive
sectors. According to industry reports, the Indian semiconductor market was valued at
around $32.35 billion in 2020 and is expected to reach $52.58 billion by 2025, growing at
a CAGR of around 10.2%.
- Domestic Consumption: India has a large and growing domestic market for semiconductors
due to factors such as population growth, rising disposable incomes, and increased
adoption of electronic devices. The demand for semiconductors is driven by various
sectors, including consumer electronics, automotive, telecommunications, industrial
automation, healthcare, and defense.
- Electronics Manufacturing Initiatives: The Indian government has launched several
initiatives to promote electronics manufacturing, including the "Make in India"
campaign, National Policy on Electronics (NPE)& Production Linked Incentives ( PLI).
These initiatives aim to boost domestic production, attract foreign investment, and create
a favorable business environment for semiconductor companies.
- Design and R&D: India has emerged as a significant hub for semiconductor design and
research and development (R&D). The country is home to numerous design houses and
R&D centers that contribute to global semiconductor innovation. Indian design
companies specialize in areas such as
chip design, embedded systems, semiconductor IP development, and verification services.
- Semiconductor Manufacturing: While India is primarily focused on semiconductor design
and assembly, efforts are being made to establish semiconductor fabrication (fab)
facilities in the country. The government has launched the Scheme for Promotion of
Manufacturing of Electronic Components and Semiconductors (SPECS) under ISM (India
Semiconductor Mission)to attract investments in semiconductor manufacturing and encourage
the establishment of semiconductor fabs in India.
- Government Support: The Indian government has taken several measures to support the
semiconductor industry. This includes providing incentives, tax benefits, and subsidies to
semiconductor companies, promoting research and development activities, establishing
semiconductor clusters and technology parks, and facilitating collaborations between
industry, academia, and research institutions.
- Skill Development: To meet the growing demand for skilled professionals in the
semiconductor industry, India has been focusing on initiatives to enhance the skill set of
its workforce. Skill development programs, vocational training, and collaborations between
industry and educational institutions are being encouraged to bridge the skill gap and
develop a highly skilled semiconductor workforce.
Overall, the Indian semiconductor industry is experiencing growth and transformation,
driven by increasing domestic demand, government initiatives, and a focus on design and
R&D. With continued support and investment, the industry is expected to contribute
significantly to Indias electronics manufacturing capabilities and emerge as a global
player in the semiconductor sector.
SPEL OPERATIONAL PERFORMANCE
The working capital constraints were overcome by Customer advances for procurement
of Materials SPEL improved the operational efficiency and improved the Cycle time and was
consistently getting repeated orders from existing Customers. SPEL also established some
contacts with Prior Customers and regained their confidence and secured some orders. The
Company is alsostriving to improve working capital limits with Banks and taking its best
efforts and also making efforts by effective utilization of vacant land in the premises.
SPEL maintains its relationship with all Customers in good form and putting efforts to
meet their QCDS factors. SPEL extends various Value-Added Services like package design,
Test HWdevelopment & drop shipment to all its Customers which help to attract
additional volumes.
The communication frequency with Customers & Sales Representatives increased and
SPEL uses all electronic media (eMails, Conference calls, Skype calls, Whatsapp calls, MS
teams, Google Meet etc.) to interact with Customers
Contribution of Sales Representatives is also ensured to bring in new business & to
reach Customers in case of any delay in shipments and unable to meet their requirements.
They are advised to bring in new Customers & new products. Weekly calls with them are
being done to ensure their activities are up to the expectations
SPEL reaches its Suppliers, Vendors and Customers to refer any new Customers if they
have come across and this has provided positive results. Few new Customer inducted through
this method.
Global demand for semiconductors will remain high in the coming quarters, as reflected
by rising sales across a range of chip products and throughout each of the worlds major
regional markets..
This will have a positive effect on SPELs business.
New RFQs received from various Customers in this Quarter including new Customers.
Quotations have been submitted and few of them converted into business and working on
other RFQs to get business
The Company is also working with Financial Institutions for Capacity Expansion and for
plant modernization and also taking efforts to avail the Government of India incentives
being offered to promote the Semiconductor eco-system within the Country.
Opportunities:
The semiconductor industry continues to offer numerous opportunities, driven by
advancements in technology, growing demand for electronic devices, and emerging trends.
Here are some key opportunities for the semiconductor industry:
- Artificial Intelligence (AI) and Machine Learning (ML): AI and ML technologies are
rapidly expanding and driving the need for more powerful computing capabilities.
Semiconductor companies can capitalize on this opportunity by developing specialized
chips, such as graphics processing units (GPUs) and neural processing units (NPUs),
optimized for AI and ML workloads.
- Internet of Things (IoT): The proliferation of IoT devices across various industries
presents a significant opportunity for semiconductor companies. IoT devices require
low-power, high- performance chips to enable connectivity, data processing, and sensor
integration. Semiconductor companies can focus on developing energy-efficient and
cost-effective solutions to meet the growing demand for IoT applications.
- 5G and Beyond: The deployment of 5G networks is gaining momentum worldwide, driving the
demand for advanced semiconductor components like RF chips, baseband processors, and
mmWave modules. Beyond 5G, the industry is exploring technologies like terahertz
communication, which will require innovative semiconductor solutions.
- Automotive Electronics: The automotive industry is increasingly relying on semiconductor
technologies for advanced driver-assistance systems (ADAS), electric vehicles (EVs), and
autonomous driving. Semiconductor companies can tap into this opportunity by providing
automotive-grade chips, sensors, and power management solutions.
- Edge Computing: With the growth of IoT and AI applications, there is a rising need for
computing power at the edge of networks. Semiconductor companies can develop edge
computingsolutions by providing high-performance, low-power chips that enable data
processing and AIinference capabilities at the edge devices.
- Renewable Energy: The shift towards renewable energy sources, such as solar and wind,
creates opportunities for semiconductor companies. These companies can develop power
management and energy conversion solutions for renewable energy systems, including
photovoltaic inverters and grid-tie converters.
- Quantum Computing: Quantum computing has the potential to revolutionize various
industries by solving complex problems that are currently infeasible for classical
computers. Semiconductor companies can contribute by developing quantum processors,
qubits, and other components that enable scalable and stable quantum computing systems.
- Healthcare Technologies: The healthcare sector is adopting semiconductor technologies
for various applications, including medical imaging, wearable devices, telemedicine, and
personalized medicine. Semiconductor companies can develop specialized chips, biosensors,
and data processing solutions to support advancements in healthcare technology.
- Data Centers and Cloud Computing: The increasing demand for data storage, processing,
and cloud services requires high-performance computing infrastructure. Semiconductor
companiescan provide data center solutions by developing advanced server processors,
memory modules,and storage devices to meet the growing needs of the cloud computing
industry.
- Environmental and Energy Efficiency: As energy efficiency and environmental
sustainability become more critical, semiconductor companies can focus on developing
energy-efficient chips, power management solutions, and components with reduced
environmental impact, such as lead- free and RoHS-compliant devices.
Here are some key Opportunities for the Company:
- Government of India has announced some special incentives for Assembly, Test, Mark &
Packaging units for providing Capex subsidy up to 50% with a minimum threshold investment
of Rs.50Crs. Your Company is exploring sourcing funds with Banks and Financial
Institutions to make use of this Opportunity.
- Due to US-China trade conflicts most Companies are looking for alternate Manufacturing
sources for Chinese OSATS and this could be of immense help.
- Post-Covid scenario business is returning to normal state all around the globe
Threats :
The semiconductor industry faces several threats that can impact its operations and
growth. Here are some significant threats faced by the semiconductor industry:
- Supply Chain Disruptions: The semiconductor industry relies on complex global
supplychains, and disruptions at any stage can have severe consequences. Events like
natural disasters, geopolitical tensions, trade disputes, or pandemics can lead to supply
chain interruptions, component shortages, and production delays.
- Technological Obsolescence: The rapid pace of technological advancements in the
semiconductor industry means that products and technologies can quickly become outdated.
Companies must continually invest in research and development (R&D) to stay
competitive and ensure their offerings remain relevant in the market. Failure to do so can
lead to the risk of being left behind.
- Intellectual Property (IP) Theft: Intellectual property theft poses a significant threat
to the semiconductor industry. Counterfeit products, unauthorized manufacturing, and
reverse engineering can result in revenue losses and damage to a companys reputation.
Protecting intellectual property rights and implementing robust security measures are
crucial to mitigate this threat.
- Competitor Pressure: The semiconductor industry is highly competitive, with numerous
global players vying for market share. Companies face intense pressure to innovate, reduce
costs, and improve efficiency to stay ahead of their competitors. Failure to keep up with
industry trends and competition can lead to market share erosion and financial setbacks.
- Cybersecurity Risks: As the semiconductor industry becomes increasingly connected and
digitalized, cybersecurity threats are on the rise. The industry deals with sensitive
data, including customer information, proprietary designs, and manufacturing processes.
Cyberattacks, data breaches, and insider threats can compromise valuable information,
disrupt operations, and harm the reputation of semiconductor companies.
- Economic Volatility: The semiconductor industry is influenced by global
economicconditions. Periods of economic downturns, recessions, or fluctuations in consumer
demand can impact semiconductor sales and revenue. Companies need to be prepared to
navigate through economic uncertainties and adapt their strategies accordingly.
- Environmental Regulations: Growing concerns about environmental sustainability and the
use of hazardous materials in the semiconductor industry have led to increased
regulations. Compliance with environmental standards, such as restrictions on certain
substances, waste management, and energy efficiency, can pose challenges for semiconductor
manufacturers.
- Geopolitical Factors: Geopolitical tensions and trade disputes between countries can
disrupt global supply chains and affect the semiconductor industry. Tariffs, export
controls, and political instability can lead to increased costs, restricted access to
markets, and trade barriers, impacting the profitability and growth of semiconductor
companies.
- Rising Manufacturing Costs: The semiconductor manufacturing process involves significant
capital investments, and costs associated with research, development, and fabrication
facilities are substantial. Factors such as increasing labor costs, equipment expenses,
and raw material pricescan impact the overall profitability of semiconductor companies.
- Shortage of Skilled Workforce: The semiconductor industry requires highly skilled
professionals, including engineers, researchers, and technicians. However, there is a
shortage of talent with the necessary expertise in certain regions. This scarcity can
impede technological advancements and innovation in the industry.
Semiconductor companies must remain vigilant, adapt to evolving threats, invest in
research and development, implement robust security measures, and maintain flexibility in
their operations to mitigate these risks and ensure long-term success
Threats to the Company:
- Further to the incentives announced by the India Semiconductor Mission for Assembly,
Test, Mark & Packaging units for providing Capex subsidy up to 50% with a minimum
threshold investment of Rs.50Crs, few Companies have registered themselves for availing
benefits out of thisscheme. Hence your Company will have Competitors in near future within
India.
- Government of India has withdrawn the export incentives offered to the Company. Your
Company is striving to reinstate the above benefits by taking up the case with appropriate
government bodies in India.
- Rising Employees costs and Energy costs & Pricing pressure from Customers
Financial Performance
The financial performance is covered in the Directors Report and can be referred
there.
Financial Ratios :
| Financial Ratios |
31-Mar-23 |
31-Mar-22 |
| Current Ratio (in times) |
1.20 |
1.24 |
| Debt-Equity Ratio (in times) |
0.51 |
0.59 |
| Debt Service Coverage Ratio (in times) |
0.28 |
4.91 |
| Return on Equity Ratio (in %) |
-6.24% |
-24.21% |
| Inventory turnover ratio (in times) |
0.22 |
0.84 |
| Trade Receivables turnover ratio (in times) |
7.68 |
0.21 |
| Trade payables turnover ratio (in times) |
0.56 |
0.38 |
| Financial Ratios |
31-Mar-23 |
31-Mar-22 |
| Net capital turnover ratio (in times) |
0.78 |
0.58 |
| Net profit ratio (in %) |
-27.67% |
-134.58% |
Notes :
- The Companyhas infused funds and minimized certain debts and hence there is reduction in
Debt-equity ratio.
- The Company has incurred losses due to stock write off and hence there is drop in return
on equity.
- The net profit is due to increase in other comprehensive income for the unsecured loan
interest amount adjustment as per IND AS requirements.
- The changes in Inventory turnover and Receivables turnover is due to accounting policy
change reported and the movement of amount reflected under Trade receivables head to
Finished goods inventory.
- Improvement in Return on Capital employed is also due to other Comprehensive income
reported for last FY 2022-23
- There is reduction in net worth by Rs.3.21Crores due to loss for last FY 2022-23
Internal Control Systems and their Adequacy
The CEO and CFO certification provided in the Annual Report discusses the adequacy
of our internal control systems and procedures.
Information Technology
The company has taken necessary precautions towards ensuring safe operation of
Internal servers and to prevent from any forms of Cyber-attacks.
Material Developments in Human Resources/Industrial Relations Front, including
number of People Employed
Your Company values its human resource as the most significant asset and the key
focus is to attract, retain and develop talent as a resource. Your Company provides a
congenial working atmosphere which will foster creative thinking. As part of manpower
development and to enhance operational efficiency, training programmes have been organised
for employees at all levels, wherever necessary.
The HR programmes of the Company focus on building capabilities and engaging employees
through various initiatives to help the organisation consolidate and achieve sustainable
future growth for the business. The details of human resource development measures taken
by the Company are also covered in the Directors Report and can be referred to in the
said Report.
The total strength of the Company as on 31st March, 2023: 138
Note-Risks and Concerns are covered under Opportunities and Threats.
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