Relocating major development work to India has helped in cost optimisation: Synaptics’ CEO

The semiconductor industry faced a significant supply chain crisis that began in 2020 and persisted for three years. Driven by the Covid-19 pandemic, demand for personal computers, home setups, docking stations, and other devices skyrocketed to unprecedented levels. However, as this phase subsided, the industry encountered a new challenge: a massive inventory surplus.

US-based semiconductor firm Synaptics chief executive officer Michael Hurlston told TechCircle in an interview that the inventory surplus severely impacted the company’s topline. Hurlston expects FY25 to be a turnaround year for the company. “We’ve begun rebuilding from the bottom, with many of our markets showing signs of recovery. Additionally, we’ve launched a range of new products that we believe will position us strongly for growth in 2025 and beyond,” he said. To be sure, Synaptics' net revenue dropped from $1.7 billion in FY22 (year ending June 2022) to $1.3 billion in FY23 and $960 million in the latest annual report.

The company has tackled variable costs by making products more affordable, Hurlston said. “In the semiconductor industry, the size of the silicon die within a package is a crucial cost determinant. We have worked to reduce die sizes across all product lineup, up to 50%, significantly lowering production costs.” A more competitive cost proposition has driven an increase in sales volumes.

Another step that the company has taken to reduce costs is relocating more development work to India and Taiwan. “Five years ago, our company had a predominantly US-based presence. Particularly last year, we shifted a significant portion of our headcount and operations from the US and Europe to India. Today, only 18% of our workforce is based in the US, despite being a US-headquartered company.” Synaptics India currently has about 400 employees, which is about 27% of the company’s total workforce. The country plans to double its workforce by 2028.

Commenting on chip manufacturing in India, Hurlston said that the country currently lacks a robust wafer manufacturing infrastructure, and it will take time to establish a strong foundation in this area. “However, the packaging segment is advancing rapidly in the country. We are collaborating with a local partner — Hyderabad-based ASIP Technologies to develop packaging solutions. Shipping packaging from India aligns well with our strategy, especially in light of ongoing geopolitical tensions.” The company also recently announced that it expects to package and assemble 10% of its chips in India by 2027.

In India, Synaptics focuses on the wireless product development side, operating on end-to-end cycles. It involves all the components (except chip fabrication) – building concept and algorithm to chip architecture, the physical design, and testing. About 80% of the wireless technology team sits in India. Hurlston added that while the company might not be as competitive in terms of salary pay, Synaptics can consistently attract top talent as employees experience full ownership of products, from concept to completion. 

“In terms of retention, our global attrition rate is 7%, notably lower than industry averages. However, in India, where attrition is typically much higher, we face tougher competition for talent. To address this, we rely on our differentiated model that emphasises meaningful work and professional growth,” he added. Synaptics plans on doubling India's workforce to 800 by 2028. 

Synaptics was founded in 1986, starting with the personal computer interface hardware and software before moving mobile phase. However, in 2017 the company made a strategic pivot towards the Internet of Things (IoT) that includes a suite of sensing, processing, and connectivity solutions. This diversification strategy gained further momentum in 2020-21 with the strategic acquisitions of Broadcom’s wireless IoT connectivity portfolio and DisplayLink. 

Going forward, Hurlston said that Synaptics will work on the organic growth of the company, even as M&A has been an important strategy historically for the company.

“Looking ahead, our M&A strategy is shifting towards technology-focused acquisitions in two primary areas: processors, particularly with an emphasis on Artificial Intelligence (AI), and wireless technology. Strengthening these capabilities is a priority, and we anticipate that such acquisitions will also enable us to attract top talent in India, further bolstering our development efforts,” he said.