Spel Semiconductor Ltd Management Discussions

Global Semiconductor Industry Market:

The global semiconductor industry market is vast and dynamic, representing one of the most critical sectors in the global economy. It includes the design, manufacturing, and distribution of semiconductor chips used across various industries like consumer electronics, automotive, telecommunications, healthcare, and industrial automation. The market has experienced significant growth in recent years, driven by demand from emerging technologies such as Al, 5G, loT, electric vehicles, and more.

Key Market Trends and Segments:

1. Market Size and Growth:

a. The global semiconductor market was valued at around USD 500 billion to USD 600 billion in 2023

and is expected to reach over USD 1 trillion by 2030, growing at a compound annual growth rate (CAGR) of approximately 7%-8%.

b. The market is heavily influenced by technological advancements, consumer demand, and the increasing integration of semiconductors in a wide range of applications.

2. Major Segments of the Semiconductor Market:

a. Memory Chips: This includes DRAM (Dynamic Random Access Memory) and NAND Flash memory, essential for devices like smartphones, computers, servers, and data centers.

b. Logic ICs (Integrated Circuits): This segment includes microprocessors, microcontrollers, and application-specific integrated circuits (ASICs) used in a variety of applications, from personal devices to industrial machinery.

c. Power Semiconductors: These include devices that manage and convert electrical energy. They are widely used in sectors like automotive (for electric vehicles), renewable energy (solar inverters), and consumer electronics.

d. Optoelectronics: This category includes semiconductor devices that convert electrical signals into light (LEDs, OLEDs, lasers) or vice versa. They are key components in displays, communications, and sensing applications.

e. Sensors: Used in automotive, healthcare, and industrial applications, sensors collect data to enable machine learning and loT devices to make intelligent decisions.

3. Geographic Market Insights:

a. Asia-Pacific (APAC): The largest and most influential region for the semiconductor market, especially in countries like China, South Korea, Japan, and Taiwan. Taiwan is home to TSMC, the worlds largest semiconductor foundry, and South Korea is home to Samsung Electronics.

b. North America: The United States is a significant player in the semiconductor market, particularly in the design and development of chips, with major companies like Intel, NVIDIA, Qualcomm, and Micron. U.S. policy is also shaping the industry, including the passage of the CHIPS Act, which encourages domestic manufacturing.

c. Europe: Although Europe has been historically behind in semiconductor manufacturing, there are efforts to increase local production to reduce dependence on Asia. The EU has set ambitious targets to produce more semiconductors within Europe in the coming years.

d. Rest of the World: Other regions, such as the Middle East, Latin America, and Africa, have a relatively smaller share but are seeing growth in semiconductor consumption, especially in automotive, loT, and consumer electronics.

4. Key Drivers of Market Growth:

a. Technological Advancements: Ongoing innovations in chip design and manufacturing (e.g., 5nm, 3nm, and future 2nm nodes) are pushing the envelope for more powerful, energy-efficient chips.

b. 5G and Telecommunications: The rollout of 5G networks is creating significant demand for chips that power base stations, smartphones, and other connected devices.

c. Automotive Industry: The shift to electric vehicles (EVs), autonomous driving, and advanced driver assistance systems (ADAS) is driving demand for semiconductors in automotive applications.

d. Artificial Intelligence (Al) and Machine Learning (ML): Al accelerators, including GPUs, FPGAs, and TPUs, are needed for Al workloads in data centers and edge devices, making Al a major growth factor for the semiconductor market.

e. Internet of Things (loT): The proliferation of loT devices, such as smart home products, connected health devices, and industrial loT applications, is increasing the need for smaller, more power- efficient chips.

f. Cloud Computing and Data Centers: The expansion of cloud services is a key driver for memory chips, processors, and specialized chips used in data centers.

5. Challenges in the Semiconductor Market

a. Supply Chain Disruptions: The semiconductor industry is highly vulnerable to supply chain issues, such as the COVID-19 pandemic, which caused disruptions in chip production and led to shortages. The ongoing chip shortages have affected industries like automotive, consumer electronics, and more.

b. Geopolitical Tensions: Trade tensions between China and the U.S., as well as the geopolitical instability surrounding Taiwan (a key hub for semiconductor manufacturing), add a level of uncertainty to the global semiconductor supply chain.

c. Rising Material Costs: The cost of raw materials such as silicon and rare earth metals has been increasing, which impacts the profitability of semiconductor manufacturers.

6. Key Players and Competitive Landscape:

a. TSMC (Taiwan Semiconductor Manufacturing Company): The worlds largest semiconductor foundry, playing a central role in the global semiconductor ecosystem.

b. Samsung Electronics: A global leader in memory chips (e.g., DRAM and NAND flash) and semiconductor manufacturing, along with producing processors for smartphones.

c. Intel: Known for its microprocessors and system-on-chip products, Intel is transitioning to modern manufacturing technologies, including advanced nodes like Intel 7 and Intel 4.

d. NVIDIA: A leader in GPUs, and increasingly critical in Al and machine learning applications.

e. Qualcomm: Specializes in chips for mobile devices and telecommunications, including Snapdragon processors and 5G solutions.

f. Micron Technology: A major supplier of memory chips, including DRAM and NAND flash, essential for consumer electronics and data storage.

7. Opportunities tor Growth:

a. Advanced Manufacturing Nodes: Companies investing in next-gen technologies like EUV lithography and the development of quantum computing chips are poised to drive the industry forward.

b. Re-shoring Semiconductor Production: Countries like the U.S. and the EU are focusing on bringing semiconductor manufacturing back to their regions, reducing dependency on Asia.

c. Sustainability: Increasing focus on sustainability and energy efficiency, both in semiconductor production and in the end products using these chips, offers opportunities for growth in green technologies.

Future Outlook :

The global semiconductor market is poised for significant growth due to the increasing demand for semiconductors across various industries, particularly with advancements in Al, 5G, automotive technologies, and loT. However, challenges such as supply chain disruptions, geopolitical tensions, and material shortages will continue to affect the markets stability. Companies that can innovate, adapt to changing geopolitical dynamics, and manage supply chain risks are likely to thrive in the coming years.

A. Market Drivers

The global semiconductor market is influenced by a variety of drivers that fuel growth and shape the industrys future. Here are the key market drivers for the semiconductor industry:

1. Technological Advancements

a. Miniaturization of Chips: As transistor sizes continue to shrink, advancements in semiconductor fabrication (e.g., 5nm, 3nm, and upcoming 2nm) allow for more powerful, energy-efficient chips. This drives demand for smaller, faster, and more capable semiconductors in everything from consumer electronics to data centers.

b. Advanced Manufacturing Technologies: Innovations in Extreme Ultraviolet Lithography (EUV), 3D packaging, and chiplet designs allow manufacturers to pack more performance into smaller chips, which is crucial for maintaining Moores Law and enhancing chip capabilities.

c. AI/ML-Optimized Chips: The rise of artificial intelligence (Al) and machine learning (ML) applications is driving the demand for specialized hardware like GPUs, TPUs, FPGAs, and ASICs designed to handle complex computations.

2 5G Network Deployment

a. Growth in Wireless Connectivity: The global rollout of 5G networks is a significant driver of semiconductor demand. 5G chips are essential for smartphones, base stations, and loT devices that rely on ultra-fast, low-latency communication. This trend is expanding the market for modems, radio-frequency (RF) chips, and network infrastructure semiconductors.

b. Connected Devices: The transition to 5G accelerates the adoption of connected devices, creating demand for semiconductors in various industries, including automotive, healthcare, and manufacturing.

3. Automotive Industry Transformation

a. Electric Vehicles (EVs): The shift to electric vehicles requires a wide range of semiconductor solutions, such as power electronics, battery management systems, and motor controllers. EVs often require more chips than traditional internal combustion engine vehicles.

b. Autonomous Driving & ADAS: Advanced Driver Assistance Systems (ADAS) and autonomous driving technologies rely heavily on semiconductors. LiDAR. radar, camera sensors, and Al-powered chips are essential for these systems, increasing demand for automotive semiconductors.

c Vehicle-to-Everything (V2X) Communication: As vehicles become more connected, the demand for Semiconductors that enable V2X communication (vehicle-to-vehicle, vehicle-to-infrastructure) rises, driving the need for communication and sensing chips.

4. Growth of Artificial Intelligence (Al) and Machine Learning (ML)

a. Data Centers and Cloud Computing: The increasing adoption of Al and ML models in data centers requires high-performance chips, such as GPUs (used in deep learning), TPUs, and specialized processors. Data center operators are increasingly investing in Al accelerators to handle complex workloads.

b. Edge Computing: As Al moves to the edge, i.e.. closer to the device, there is a growing need for low- power semiconductors capable of processing data locally, without the need to send it to a centralized data center. This is particularly important in applications such as autonomous vehicles, smart cities, and industrial automation.

5 Internet of Things (loT) Expansion

a. Smart Homes: The proliferation of smart home devices like smart thermostats, security systems, and voice assistants (e.g., Amazon Alexa, Google Assistant) is creating significant demand for loT chips (e g., Wi-Fi, Bluetooth, Zigbee, sensors).

b. Industrial loT (lloT): Industries such as manufacturing, logistics, and healthcare are increasingly adopting loT solutions for automation, remote monitoring, and predictive maintenance, driving the need for semiconductors used in sensors, connectivity modules, and edge computing devices.

c. Wearables: The growing popularity of wearable devices like smartwatches, fitness trackers, and health monitoring systems is driving demand for small, power-efficient chips that handle sensors, connectivity, and processing.

6. Cloud Computing and Data Center Growth

a. Cloud Services Expansion: With the growth of cloud computing and big data, the demand for semiconductors in data centers continues to rise. Servers require high-performance processors (e.g., Intel Xeon, AMD EPYC), memory chips (e.g., DRAM, NAND), and networking chips to manage and process large volumes of data.

b. Storage Solutions: The exponential growth in data is also driving demand for storage devices (e.g., solid-state drives (SSDs)) and related memory semiconductors used in cloud infrastructure.

7. Consumer Electronics and Mobile Devices

a. Smartphones: The global demand for smartphones is one of the largest drivers for the semiconductor industry. Chips like application processors (e.g., Qualcomm Snapdragon, Apple A-series) and memory chips (e.g., DRAM, NAND flash) are critical to smartphone functionality.

b. Laptops and Tablets: The increased reliance on remote work and online learning, especially after the COVID-19 pandemic, has driven demand for laptops and tablets, which require semiconductors for processing, memory, and connectivity.

c. Gaming Consoles: The growing popularity of gaming consoles like PlayStation, Xbox, and PC gaming is fueling demand for high-performance chips such as GPUs, CPUs, and specialized gaming hardware.

8. Healthcare and Medical Devices

a. Medical Equipment: The growing use of semiconductors in healthcare devices, including diagnostic equipment, imaging systems (e.g., MRI, CT scanners), and patient monitoring systems, is a key driver. The demand for biometric sensors, wearables for health monitoring, and telemedicine technologies also contributes to semiconductor growth.

b. Telemedicine and Remote Healthcare: With the expansion of telemedicine and the move toward remote patient monitoring, healthcare devices and associated chips are becoming increasingly important.

9 Supply Chain and Geopolitical Factors

a. Reshoring and Localization: Geopolitical tensions and the vulnerability of the global semiconductor supply chain have led to efforts by governments to reshore semiconductor manufacturing and reduce reliance on specific regions (like Taiwan and China). Initiatives like the U.S. CHIPS Act and EUs Digital Compass aim to boost semiconductor production in North America and Europe, which can drive demand for local manufacturing equipment and infrastructure.

b. Global Shortages: The semiconductor industry experienced significant shortages during the COVID-19 pandemic, affecting automotive, consumer electronics, and other sectors. These shortages highlighted the importance of semiconductor production, encouraging investments to increase global supply capacity and build resilience in the supply chain.

10. Sustainability and Energy Efficiency

a. Green Technologies: There is growing emphasis on energy-efficient chips as industries focus on reducing their carbon footprint. Semiconductors play a crucial role in enabling green technologies, such as solar energy systems, electric vehicles (EVs), and smart grids.

b. Sustainable Manufacturing: Semiconductor companies are increasingly adopting sustainable practices to reduce the environmental impact of manufacturing processes, including water conservation, energy- efficient tabs, and the recycling of materials.

The global semiconductor market is driven by a combination of technological advancements, emerging applications, and the growing demand for smart, connected devices. 5G, AI/ML, loT, and automotive innovations (particularly electric vehicles and autonomous driving) are all major drivers of semiconductor growth. The continued advancement of semiconductor technologies and the ongoing transformation of industries relying on digital solutions will keep fueling the markets expansion.

B. Semiconductor Mergers:

Here are some recent semiconductor Company mergers:

Mergers and acquisitions (M&A) in the semiconductor industry have been a common strategy for companies to expand their capabilities, gain access to new technologies, enter new markets, or consolidate their position in a highly competitive market. These deals often involve the combination of companies with complementary technologies, intellectual property, or manufacturing capabilities. Below are some notable semiconductor M&A activities in recent years:

1. NVIDIA & ARM Holdings (Proposed); 2. AMD & Xilinx; 3. Intel & Mobileye; 4. Qualcomm & NXP; Semiconductors; 5. Broadcom & CA Technologies; 6. Marvell Technology & Cavium; 7. TSMC & VIS; 8. Texas Instruments & National Semiconductor; 9. Microchip Technology & Atmel; 10. Infineon Technologies & Cypress Semiconductor

Trends in Semiconductor Merger & Acquisition:

1. Consolidation: Large players like NVIDIA, Intel, and Qualcomm are acquiring smaller companies to consolidate market position and gain access to cutting-edge technologies like Al, automotive, and 5G.

2. Focus on High-Performance Computing: Companies are increasingly looking to acquire firms that specialize in Al, machine learning, and data center technologies, as these areas are growing rapidly and require advanced semiconductor solutions.

3. Automotive and loT Growth: The acquisition of companies with expertise in automotive semiconductors and loT has been a major trend, as both industries require new chips for connectivity, power management, and processing.

4. Geopolitical and Regulatory Considerations: M&A activity in the semiconductor industry is often influenced by geopolitical factors, such as the U.S.-China trade tensions and the EUs antitrust regulations. These factors can complicate deals, as companies must navigate regulatory scrutiny,

especially in critical sectors like telecommunications and defense.

C. Outsourced Assembly and Test (OSAT) Industry

The Global Outsourced Assembly and Test (OSAT) Industry refers to the outsourcing of the final stages of semiconductor production, including assembly (packaging) and testing, to third-party companies. These companies are essential for the semiconductor manufacturing ecosystem as they provide advanced packaging solutions, testing services, and assembly for semiconductor components before they reach end Customers or device manufacturers. The OSAT industry is crucial in Meeting the ever-growing demand for semiconductors, driven by innovations in consumer electronics, automotive, telecommunications, and other industries.

Key Segments and Services in the OSAT Industry:

1. Assembly/Packaging Services:

• Semiconductor Packaging: This involves encasing semiconductors in protective materials to prevent damage and allow for easier integration into electronic devices. Different packaging techniques are used depending on the type of semiconductor and its intended application, such as flip-chip packaging, wire bonding, and system-in-package (SiP).

• Advanced Packaging: Techniques such as 3D packaging, wafer-level packaging (WLP), and chip- on-chip are becoming increasingly important as semiconductor sizes shrink and performance demands increase. These packaging techniques improve the performance, power efficiency, and thermal management of chips.

2. Testing Services:

• Functional Testing: Ensures that semiconductors meet the required performance standards. This typically occurs after assembly and before the product is shipped to Customers.

• Reliability and Quality Testing: Includes tests for environmental and mechanical stresses, such as thermal cycling, shock resistance, and vibration tests.

• Automated Testing: With the rise of complex chips, automated testing equipment (ATE) is used to ensure consistency and efficiency in testing at high volumes.

3. Outsourced Assembly and Test Regions:

• Asia-Pacific (APAC): The APAC region, particularly countries like China, South Korea, Taiwan, Japan, and Singapore, dominates the global OSAT market. The region accounts for a significant portion of the industrys global revenue due to the presence of leading companies such as ASE Group, Amkor Technology, and Siliconware Precision Industries.

• North America: North America is also a significant market, particularly for testing services, as many semiconductor companies based in the U.S. outsource the final assembly and testing stages to third- party vendors.

• Europe: The OSAT industry is smaller in Europe, but companies like STMicroelectronics have an increasing focus on outsourcing certain packaging and testing services to meet the growing demand for semiconductors.

4. Market Trends and Drivers:

A. Miniaturization of Semiconductors:

a. As semiconductors continue to shrink in size and increase in complexity, demand for advanced packaging solutions is growing. Technologies like 3D packaging, chip stacking, and system-inpackage (SiP) are helping improve performance, reduce power consumption, and enhance functionality.

b. The growing trend towards high-density interconnects (HDI) and multi-chip modules (MCM) is

driving the demand for OSAT services that can support these innovations.

B. 5G and Telecommunications:

a. The rollout of 5G networks has significantly boosted the demand for semiconductors with specialized packaging and testing requirements. These chips need to be highly reliable, energy- efficient, and optimized for high-frequency performance, driving innovation in packaging solutions and testing.

b. OSAT companies are increasingly providing advanced packaging solutions for 5G base stations, network infrastructure, and 5G-enabled devices.

C. Automotive Industry Growth:

a. The rise of electric vehicles (EVs), autonomous driving, and advanced driver assistance systems (ADAS) has led to an increasing demand for automotive-grade semiconductors. These chips require special packaging and rigorous testing due to their safety-critical nature and operating conditions (e.g., high temperatures, vibrations).

b. The OSAT industry plays a crucial role in Meeting these needs by providing durable, high- performance packaging and thorough testing for automotive chips.

D. Consumer Electronics:

a. The demand for smartphones, wearables, smart home devices, and other consumer electronics is growing rapidly, creating continuous demand for semiconductor assembly and testing services. High-performance chips with lower power consumption are required, and OSAT companies are innovating to deliver solutions that address these needs.

b. The Internet of Things (loT) is a major driver as well, with OSAT companies providing packaging and testing services for the large number of connected devices requiring semiconductors.

E. Increasing Demand for Advanced Packaging:

a. As the demand for performance increases, especially in areas like Al, machine learning, and data centres, advanced packaging techniques are becoming more common. OSAT companies are focusing on wafer-level packaging, fan-out packaging, and multi-die packaging to meet the needs of next-generation semiconductors.

b. Additionally, the trend of heterogeneous integration (combining different semiconductor technologies in a single package) is pushing OSAT players to offer packaging solutions that allow for such integration.

F. Cost Pressures and Supply Chain Resilience:

a. Semiconductor companies continue to face cost pressures and must balance high-quality testing with low-cost production. This has made outsourcing to OSAT companies, which can provide economies of scale, an attractive option.

b. The COVID-19 pandemic revealed vulnerabilities in semiconductor supply chains, making supply chain resilience and flexibility even more critical. Many companies are looking to diversify their suppliers and build more resilient supply chains, which could affect outsourcing strategies.

G. Sustainability and Green Packaging:

a. With growing environmental concerns, there is increasing interest in sustainable semiconductor packaging. OSAT companies are developing environmentally friendly materials and processes to reduce energy consumption and waste in the assembly and testing stages.

b. The development of lead-free packaging, recyclable materials, and processes that reduce the use of toxic chemicals are gaining traction in the industry.

Major Players in the OSAT Industry:

1. ASE Group (Advanced Semiconductor Engineering):

2. Amkor Technology:

3. JCET Group:

4. Siliconware Precision Industries (SPIL):

5. Nordic Semiconductor:

6. King Yuan Electronics:

Market Challenges:

1. Rising Costs: The cost of advanced materials, labor, and manufacturing facilities is increasing. This has led to rising service prices, which could impact the OSAT industrys competitiveness.

2. Capacity Constraints: With increasing semiconductor demand, OSAT companies are facing capacity limitations, particularly when it comes to advanced packaging solutions like 3D packaging or chip stacking.

3. Supply Chain Risks: Disruptions in the global supply chain, especially during events like the COVID-19 pandemic, can impact OSAT providers ability to source materials or provide timely services.

OSAT Industry Outlook

The global outsourced assembly and test (OSAT) industry plays a vital role in the semiconductor supply chain, serving key sectors such as consumer electronics, telecommunications, automotive, and industrial automation. As demand for semiconductors continues to grow, driven by innovations like 5G, Al, and loT, the OSAT market is expected to expand further. Companies are also adapting to challenges like cost pressures, supply chain resilience, and the need for advanced packaging solutions. OSAT players will continue to innovate, focusing on high-performance packaging, testing, and sustainable practices to meet the evolving needs of the semiconductor industry.

D. The Indian Semiconductor Industry

Indias semiconductor industry is still in its developmental stage compared to other global powerhouses like the United States, Taiwan, South Korea, and China. However, India plays an integral role in the semiconductor ecosystem, particularly in design, testing, research and development (R&D), and services. The countrys semiconductor industry is poised for rapid growth due to several factors:

• Strong IT and software capabilities.

• Government support and initiatives.

• Presence of global semiconductor companies with R&D facilities and outsourcing operations in India.

• Growing demand in electronics, automotive, telecommunications, and consumer goods sectors.

• Rising focus on semiconductor manufacturing and assembly in India.

Key Areas of Focus for India in Semiconductor Manufacturing:

1. Semiconductor Design and R&D:

a. India has a well-established Semiconductor design ecosystem, with a number of companies focusing on designing chips for various applications like mobile devices, consumer electronics, automotive, and networking equipment.

b. Companies like Qualcomm, Intel, Texas Instruments, and Broadcom have research and development (R&D) facilities in India, where they design and test chips.

c. Startups and companies like Signal chip and Ineda Systems are making advancements in Semiconductor design for specialized applications like 5G, loT, automotive electronics, and Al.

2. Manufacturing and Assembly:

a. India has long relied on importing Semiconductors, with most of the manufacturing taking place in countries like Taiwan, China, and South Korea. However, the Indian government has launched initiatives to boost Semiconductor manufacturing within the country.

b. The Production-Linked Incentive (PLI) Scheme launched in 2021 by the Indian government aims to incentivize semiconductor manufacturing by offering financial support to companies establishing semiconductor fabrication plants (tabs) and display fabs. Global Foundries, TSMC, and Samsung have shown interest in setting up manufacturing facilities in India, given the countrys large domestic

market and its growing potential as a manufacturing hub.

3. Semiconductor Testing and Assembly:

a. India is already a significant player in semiconductor testing and assembly services. Companies like Wipro, HCL Technologies, and Tata Consultancy Services (TCS) have been involved in semiconductor design verification, testing, and providing services to global semiconductor players.

b. The outsource assembly and test (OSAT) industry is expected to grow, with a focus on providing assembly, packaging, and testing services for semiconductors used in consumer electronics, automotive, and industrial applications.

4. Focus on Automotive and Electric Vehicles (EVs):

a. The automotive sector in India is one of the most significant consumers of semiconductor components. As electric vehicles (EVs) gain traction in the country, the demand for automotive-grade semiconductors for power electronics, battery management systems, and advanced driver- assistance systems (ADAS) is rising.

b. Companies like Mahindra Electric, Tata Motors, and others are actively developing EVs, requiring an increasing number of semi conductors for electric powertrains, sensors, and infotainment systems.

5. 5G and Telecommunications:

a. The rollout of 5G networks in India is driving demand for semiconductors used in base stations, devices, and wireless communication equipment. Companies like Reliance Jio, Bharti Airtel, and Vodafone Idea are ramping up efforts to roll out 5G infrastructure, creating a massive demand for specialized chips.

b. Indias involvement in 5G semiconductor manufacturing is also growing as companies seek to develop low-cost solutions for local markets. The "Indian Institute of Technology (IIT)**s and various R&D centers are working on developing 5G-related semiconductor technologies.

6. Government Initiatives and Policies:

The Government of India has recognized the strategic importance of Semiconductors in the global

economy and has made efforts to create a conducive environment for the industrys growth:

a. PLI Scheme for Semiconductors: As mentioned earlier, the government has launched a Production Linked Incentive (PLI) Scheme for semiconductor manufacturing. This scheme offers financial incentives to companies setting up Semiconductor fabs, assembly units, and R&D centers in India.

b. Atmanirbhar Bharat Abhiyan (Self-reliant India Campaign): One of the primary objectives of this campaign is to reduce Indias dependence on imports, including Semiconductors. The government is focusing on strengthening domestic manufacturing capabilities.

c. Semiconductor Mission: In December 2021, India launched a Semiconductor Mission with an investment of around INR 76,000 crore (~$10 billion) to set up fabs and support the development of the semiconductor ecosystem.

7. Talent Pool and Education:

a. India has a vast talent pool of skilled engineers, designers, and software developers who contribute to Semiconductor design, software development for Semiconductor tools, and R&D activities.

b. IITs (Indian Institutes of Technology) and other leading technical institutes have been producing highly skilled engineers in the fields of electronics, embedded systems, and microelectronics, who are crucial for the development of the semiconductor sector.

Key Players in the Indian Semiconductor Industry:

Tata Group, Qualcomm, Intel, Wipro, Ineda Systems, SEMIndia, Micron Technology Challenges Facing the Indian Semiconductor Industry:

Lack of Domestic Fabs: India currently does not have a domestic Semiconductor fab, and most of its Semiconductor requirements are met through imports. The establishment of Semiconductor fabs will take time due to high capital expenditure and technological complexities involved.

Supply Chain Dependencies: India is heavily reliant on global Semiconductor supply chains, and disruptions, such as those seen during the COVID-19 pandemic, can affect the availability of chips.

Skilled Workforce Shortage: While India has a strong pool of engineers, there is still a shortage of highly specialized talent in areas like Semiconductor manufacturing and advanced packaging.

Investment and Infrastructure: Setting up Semiconductor fabs requires significant investment in infrastructure, including advanced manufacturing technologies, cleanrooms, and R&D facilities. This infrastructure is still under development in India.

Outlook for Indian Semiconductor Industry: The Indian Semiconductor industry is at a pivotal moment, with strong government support, a growing domestic market, and increasing global demand for Semiconductor components. India has the potential to become a significant player in the global Semiconductor supply chain, especially in areas like Semiconductor design, R&D, testing, and assembly. However, challenges such as lack of domestic manufacturing fabs and supply chain dependencies need to be addressed. With continued investment, innovation, and policy support, Indias Semiconductor industry is poised for growth and will play an increasingly critical role in the global Semiconductor ecosystem.

Opportunities & Threats in OSAT Industry: In the context of Outsourced Semiconductor Assembly and Test (OSAT), the Opportunities and Threats are shaped by factors unique to the Semiconductor industry, global supply chains, and technological advancements. Below is a breakdown of these opportunities and threats:

Opportunities in OSAT:

Growing Demand for Semiconductors: The increasing demand for semiconductors across various industries such as automotive (e.g., electric vehicles), consumer electronics, loT, 5G infrastructure, and Al-driven devices creates opportunities for OSAT providers to expand their services.

Technological Advancements in Packaging: With innovations in semiconductor packaging such as 3D packaging, System-in-Package (SiP), and wafer-level packaging, OSAT companies can offer advanced solutions, improving performance, miniaturization, and energy efficiency, thereby gaining a competitive advantage.

Diversification in End Markets: The rise of emerging markets like automotive electronics, artificial intelligence, and edge computing provides new revenue streams for OSAT companies. As these industries require specialized semiconductor packaging and testing solutions, OSAT firms can expand their portfolios to meet specific needs.

Global Semiconductor Shortage: The global chip shortage has put pressure on manufacturers to ramp up production. This has created a surge in demand for OSAT services, which handle the final steps of semiconductor production. OSAT providers can capitalize on the increased need for assembly and testing capacity.

Outsourcing Trend from Fabless Semiconductor Companies:

Many fabless semiconductor companies (who design chips but do not own manufacturing facilities) rely on OSAT providers for assembly and testing. As more companies adopt fabless models, the demand for OSAT services will continue to grow.

Nearshoring and Regionalization of Supply Chains: The shift toward regional supply chains, especially in the wake of geopolitical tensions and the COVID-19 pandemic, presents an opportunity for OSAT companies to provide services closer to their Customers, reducing lead times and logistics costs.

Sustainability and Green Packaging Solutions: With increasing focus on sustainability, OSAT companies can offer environmentally friendly packaging and testing solutions, Meeting regulatory requirements and consumer demand for greener products.

Threats in OSAT

Price Pressures and Cost Competitiveness: As semiconductor companies seek to reduce costs, OSAT providers face intense price competition. Lower margins can result from pricing pressures, especially from low-cost regions like Southeast Asia, which could erode profitability.

Supply Chain Disruptions: The semiconductor industry is highly sensitive to global supply chain disruptions. Events like natural disasters, geopolitical tensions (e.g., US-China trade war), and pandemics can disrupt the availability of materials, delay production timelines, and increase costs for OSAT providers.

Technological Complexity and Innovation Challenges: As semiconductors continue to become smaller and more complex, OSAT companies must constantly invest in R&D to keep up with evolving technologies. Failure to adapt to new packaging technologies or advanced testing methodologies can result in lost market share.

Consolidation and Mergers among OSAT Providers: The semiconductor assembly and test industry has seen significant consolidation. Larger companies may dominate the market, reducing opportunities for smaller OSAT players and increasing competition for contracts from Customers.

Labour Shortages and Skills Gap: As semiconductor technology becomes more advanced, OSAT companies may struggle to find workers with the necessary technical skills to operate sophisticated equipment for assembly and testing. A shortage of skilled labour can lead to delays, errors, and reduced efficiency.

Geopolitical Risks: The OSAT industry is heavily influenced by geopolitical dynamics. Trade wars, tariffs, and sanctions (such as those between the US and China) can disrupt the global semiconductor supply chain, impact the flow of materials, and limit market access for OSAT providers.

Intellectual Property (IP) Theft and Cybersecurity Risks: OSAT companies work with proprietary technologies, and the risk of intellectual property theft is a constant concern, especially in regions with weaker IP protections. Cyberattacks can also jeopardize sensitive testing data, leading to financial and reputational damage.

Environmental Regulations: Increasingly stringent environmental regulations on hazardous materials, waste disposal, and emissions could impact the costs of semiconductor assembly and testing. OSAT companies must adapt to comply with local and international environmental standards, which could require significant investments.

Summary:

Opportunities for OSAT providers stem from the rapid growth in semiconductor demand, technological advancements in packaging, and shifting supply chain dynamics. By capitalizing on trends like fabless semiconductor models, automotive and Al markets, OSAT providers can expand and grow.

Some key Opportunities for the Company:

1. 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 ofRs.50Crs. The Tamilnadu State Government has also announced special incentive of 50% of what is offered as incentive by Central Government ie) 25% of Project cost. Your Company is exploring sourcing funds with Banks and Financial Institutions to make use of this Opportunity.

2. Due to US-China trade conflicts most Companies are looking for alternate Manufacturing sources

for Chinese OSATS and this could be of immense help

Threats, on the other hand, include external factors such as price pressure, supply chain disruptions, technological challenges, and geopolitical instability. OSAT companies must also navigate competition and potential consolidation while ensuring they adapt to new regulatory and labour demands.

Threats to the Company:

1. Further to the incentives announced by the India Semiconductor Mission for Assembly, Test, Mark & Packaging units your Company will have Competitors in near future within India.

2. 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.

3. Rising Employees costs and Energy costs & Pricing pressure from Customers

4. Orders slowdown due to Global inventory correction process with many component suppliers.

Financial Performance

The financial performance is covered in the Directors Report and can be referred there.

Financial Ratios:

Financial Ratios

Financial Ratios	Mar 31, 2025	Mar 31, 2024
Current Ratio (in times)	0.77	1.01
Debt-Equity Ratio (in times)	2.4	0.84
Debt Service Coverage Ratio (in times)	(3.81)	(2.97)
Return on Equity Ratio (in %)	(162.99)	(50.75)
Inventory turnover ratio (in times)	0.26	0.27
Trade Receivables turnover ratio (in times)	8.07	7.93
Trade payables turnover ratio (in times)	(6.01)	0.67
Net capital turnover ratio (in times)	0.47	11.64
Net profit ratio (in %)	(267.62)	(139.85)

Analysis of Financial Ratios : (FY2024-25)

a. The Net loss and drop in Return on Equity is due to Old inventory write off

b. Increase in Debt-equity and Debt service coverage is due to additional Rs.2.25Cr availed from the bank and equity reduction due to losses.

c. Net Capital turn over increase is due to decrease in Sales turnover Internal Control Systems and their Adequacy

The HO & WTD 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/lndustrial 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 programs have been organised for employees at all levels, wherever necessary. The HR programs of the Company focus on building capabilities and engaging employees throughvarious 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 Mar 31,2025: 103

Note : Risks and Concerns are covered under Opportunities and Threats.

Date: Aug 13, 2025
Place : Chennai
	By Order of the Board
	For SPEL Semiconductor Limited
Sd/-	Sd/-
S. Chandramohan	P. Balamurugan
Director	Head Operations & Whole-Time Director
DIN : 0052571	DIN : 07480881