BENGALURU -- India needs greater involvement from foreign semiconductor companies if it is to successfully build a chip ecosystem, Kaynes Semicon CEO Raghu Panicker told Nikkei Asia in an interview, as his company targets 3 billion rupees ($31 million) in the fiscal year ending March 2027 and eyes new segments like the power industry.

The Indian government is currently plowing billions of dollars into the semiconductor sector in a bid to turn it into a competitive national industry. Kaynes' packaging and testing plant, inaugurated in March in Indian Prime Minister Narendra Modi's home state of Gujarat, is one of the country's five factories in chip assembly, packaging and testing that went into operation this year off the back of that drive. Together, they represent an early test of how those ambitions are progressing.

While expressing admiration at how quickly the Indian sector has developed so far, Panicker said there is a need for joint ventures between Indian and foreign companies, in particular chip-related alloy makers for the latter. Lead frames and bonding wires used in chip packaging need ultra pure copper and gold, usually in the form of alloys containing other metals for more resilience.

"We would require people who have done this in the past to teach us and also gain out of it because there is a huge market here," he said.

At India's annual flagship Semicon chip event in September, Kaynes Semicon General Manager Hernanie Torres also identified the issue of India's lack of expertise regarding key raw materials used in chip packaging.

Materials such as lead frames, molding compounds and bonding wires make up anywhere between 2% to 15% of the total manufacturing cost for a company like Kaynes, Torres said in a keynote speech. While suppliers in Japan, South Korea and Taiwan have built up decades of experience, leading to a ready supply of orders, it would take up to 18 months for an Indian entrant to qualify for customers.

At the same time, Kaynes established its factory in what industry reports have called a "record" time for a facility of this type. The company took only eight months to get its operations off the ground, from acquiring land to building the factory and hiring workers, Panicker said.

"We never felt that this would happen in India," Panicker said. "And then when it did, we felt 'How do we become a part of it?' Once we did that, we wanted to show the speed at which we can operate." Kaynes Semicon CEO Raghu Panicker says there is a need for joint ventures between Indian and foreign companies, particularly with makers of chip-related alloys.

Kaynes' 15,000-square-meter plant is designed for an annual production of 2.3 billion units. It only started booking commercial scale revenue in the current quarter, and is aiming to ramp up the scale of production in the coming months.

The company, a subsidiary of the listed Kaynes Technology, has three major clients and 22 customers in the pipeline.

It is targeting global and domestic clients in the vast automotive and industrial consumer segments such as air conditioners and smart fans. It is also investing in power semiconductor products, such as those used in inverters and windmills. Panicker said the company is also considering opportunities under the second phase of India's semiconductor mission, adding that it is in talks with three state governments.

India has committed more than $24 billion to its semiconductor push across two phases. Under the first phase that began in 2021, 12 projects were approved. These include the five packaging plants and the Tata group's fabrication plant, which is yet to start production. Under the second phase that was initiated in August, India is now pushing for the development of an entire chip ecosystem -- from chip design to materials and equipment manufacturing.

"The ecosystem development will happen over a period of time," Panicker said. "Continuity by the government is the key."

There have been occasional hiccups with the ramp-up at Kaynes' current facility. Semiconductor facilities require that the imported equipment is not exposed to dust, humidity or even skin flakes, but India's customs procedures require that such packages must be opened and inspected. For Kaynes, that has meant staff at the India Semiconductor Mission have had to make some interventions. The company has also sent employees to talk to customs officers. Panicker suggested that ports could build cleanrooms where the equipment could be taken out and inspected safely. Nonetheless, he is upbeat about India's current policy environment. "I am thrilled by the competitiveness among the state governments," he said.

"The moment I say that I am announcing something, there are tons of [state] officials saying, 'What can we do?' And I am in a situation of negotiating with the governments, asking, 'Give me this or give me that.' "It is a very good atmosphere that is being created."