Semiconductor chips manufacturer Polymatech Electronics will invest around $100 million to manufacture medical and horticulture electronic chips in Bahrain, said chief executive officer and managing director Eswara Rao Nandam.
Polymatech's Nandam says Bahrain offers a continuous, uninterrupted power supply and the availability of certain gases essential for the processes, which ensures zero downtime in operations
Semiconductor chips manufacturer Polymatech Electronics will invest around $100 million to manufacture medical and horticulture electronic chips in Bahrain, said chief executive officer and managing director Eswara Rao Nandam.
In an exclusive interaction with Outlook Business on the sidelines of the second edition of Gateway Gulf 2024 organised by Bahrain Economic Development Board (Bahrain EDB), Nandam discussed the company’s strategic expansion into the Middle East, with its first major investment in Bahrain. He also spoke about the challenges for India’s semiconductor sector, the company’s IPO plans, and how government support can accelerate the sector’s growth.
Polymatech has recently entered the Middle East, making your first investment in Bahrain. Why did you choose Bahrain, and could you share some insights into your broader expansion plans in the Middle East region?
Our focus in the Middle East is primarily on two areas: medical electronics and horticulture electronics. We will be manufacturing chips related to these segments. For medical electronics, we need to have production facilities in different regions, and Bahrain will serve as one of these locations. For horticulture, we chose Bahrain because, post-COVID, many countries are prioritizing self-sustainability, particularly in food security. With our horticulture lighting solutions, people can grow their own food, which aligns with the increased focus on food security.
Additionally, Bahrain offers a continuous, uninterrupted power supply and the availability of certain gases essential for our processes, which ensures zero downtime in our operations. Bahrain also has a longstanding business relationship with India, spanning over 2,000 years. The people there are friendly and understanding, and the large Indian community makes it an even more attractive destination for us. The Bahraini government has also been incredibly accessible and supportive.
How much are you investing in Bahrain, and how is the investment structured?
We are investing $100 million in two phases. The first phase involves about $20 million for equipment and machinery in leased premises. Simultaneously, we are securing land from the government, on which we will construct our own facility. The remaining $80 million will be used for additional machinery for this new building. This industry doesn’t require a large workforce due to the highly automated nature of semiconductor manufacturing. We will employ about 50 people—40 of whom will be fresh, young Bahraini graduates, with the remaining 10 brought in from other countries.
Switching to the semiconductor industry in India, where do you think India currently stands?
With initiatives like Digital India, Atmanirbhar Bharat, and Make in India, introduced by our honorable Prime Minister, India is on track to become a global leader in semiconductor and electronic components manufacturing. By 2030, I believe India will be among the top three countries in the world in this sector.
You highlighted that Polymatech will be a fully “fab to floor” company. Could you explain what this entails?
Within the semiconductor industry, there are four main verticals: producing ingots and wafers, manufacturing semiconductors, packaging semiconductors, and creating the final products. We will handle each of these steps.
For the first step, we will produce silicon, silicon carbide, and sapphire ingots and wafers. This technology is licensed through a partnership with ECM in France, where we are setting up a joint venture in Grenoble, along with a unit in India. For semiconductor manufacturing, we will utilize our recently acquired US company, Nicene Group, for production, with another plant planned in India.
As for packaging, we have been doing this for the past seven to eight years in Chennai, and will continue in Bahrain, the US, and the UK. Final products will be produced in Bahrain for medical and horticulture purposes, while other applications, like field-effect transistors and silicon-controlled rectifiers, will be manufactured in the US and India.
Moving on to your IPO plans, SEBI recently returned your draft papers. Could you provide some context on that?
SEBI returned our Draft Red Herring Prospectus (DRHP) because our merchant banker is holding some shares, which was not disclosed in the filing. Polymatech has become financially robust through various ventures, not just within India but internationally. When we require funds, we will re-file for an IPO, but this will only happen after consolidating our global operations into one balance sheet. At that point, the IPO will truly unlock the company’s value.
Do you have a timeline for when you plan to file the papers again?
We are currently in discussions with merchant bankers, and KPMG is assisting us in presenting Polymatech to potential investors. As the company has grown, the IPO process has become more complex. We have brought in professionals to manage these aspects, with Bank of Baroda as the lead merchant banker.
Semiconductor industry is highly capital-intensive, and infrastructure has been a challenge for Indian chip makers. How has the response been from venture capitalists?
I personally do not have much experience with venture capitalists, as we have not sought their support. When we initially approached banks for a small loan of around 15 crores, only Bank of Baroda and Indian Bank understood and supported our vision. Although the government is offering collateral-free loans, the banking sector has been hesitant as they are still unfamiliar with the semiconductor business.
How can the Indian government better support the semiconductor industry?
The Indian government is doing an excellent job in providing robust support. In the US, if you propose a semiconductor venture, investors quickly express interest. The Indian government is striving to create a similar environment, with the Prime Minister’s office and the India Semiconductor Division working tirelessly to promote the industry. From my experience, the support from state governments in Tamil Nadu, Telangana, and Maharashtra has been outstanding. These officials act more like CEOs of their states, making the process efficient and responsive.