Investing in India profitable: LSI

Speaking to Divya Girish of CIOL, Jeff Richardson,executive vice president and general manager, Semiconductor Solutions Group, LSI Corporation, talked about the company's plans, market positioning and the way forward.

What were the key considerations before investing in India?

When we looked at India, there were a few key things we considered. Access to large numbers of high-caliber engineers was a very key consideration. We have an incredibly talented workforce in India that is working on almost every part of LSI’s product line. We also knew that as an end market, growth in the Asia-Pacific region, including India, would outpace growth in the rest of the world.

These regional markets may have unique requirements for features and capabilities, and developing our products locally could give us an advantage in terms of understanding these demands. We also expected that our customer base would continue to build their own teams in India, and we wanted to be in a position to work with those design teams locally.

What kind of R&D work will LSI do in the Bangalore center? Can we expect end-to-end products coming out of the center?

The employees in our Bangalore design center are involved in the development of almost every LSI product. We are developing software, systems and semiconductor solutions in India, and increasingly doing 'end-to-end' development here, from product definition to architecture, design and testing. This will represent the third largest center in the world.

What kind of growth has this industry seen in recent times?

As the global economy recovers, the semiconductor industry is expected to return to high-single digit annual growth rates. Closer to home for LSI, the underlying demand for storage capacity is predicted to grow at more than 50 p.c per year while network traffic growth is expected to increase by more than 30 p.c per year. These factors bode well for the industry’s and LSI’s future prospects.

Worldwide semiconductor capital equipment spending is projected to surpass $29.4 billion in 2010, a 76.1 percent increase from 2009 spending of $16.7 billion, according to Gartner, Inc. What is the reason for this growth and how much of it is LSI’s contribution?

Spending on semiconductor capital equipment is generally dictated by the global demand for semiconductors as well as capital investments in equipment for process technology transitions, such as moving from 40nm to 28nm. LSI does not directly purchase semiconductor manufacturing equipment because we are a fabless semiconductor company, and we work with foundry partners to have our chips manufactured.

We are seeing strong demand in our targeted end markets of networking and storage, fueled by the continued explosion in worldwide digital content creation and the need to store and move this data around the world.

Can you tell us some of your big clients and what is the scale of business you do with them?

LSI does business with almost all leading OEMs in the storage and networking industry including Seagate, IBM, Cisco, Dell, Ericsson, Oracle and Nokia-Siemens Networks. Given the close collaboration we have with many of our customers, and the fact that our engagements with customers span both current and future products, we cannot disclose the scale of business with our customers.

Are there plans to identify the steps to become profitable in reasonable time, and thus have a good Return-on-Investments?

In our most recently reported quarter, the second quarter of 2010, LSI’s non-GAAP operating margins increased to 12.1 per cent. We remain focused on achieving our business model goal of 17per cent as soon as possible. Our expansion in India gives us one more lever to drive additional growth for the company and achieve our business model goals.