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Renesas Electronics Corporation seems to be rapidly building its strengths in the world of connected devices and endpoint or edge intelligence. It recently acquired Reality AI, invested in Arduino, and has now just announced a major strategic partnership with Tata Motors Ltd and Tejas Networks, both Tata Group companies. The partnership will support design, development, and manufacturing of Renesas’ semiconductor solutions for both the Indian and emerging markets.
On the surface, this might look like just another major chip company setting up a development center in India to provide engineering resources for the specifications developed at headquarters. But, in an interview with EE Times, Sailesh Chittipeddi, executive vice president and general manager of the IoT and infrastructure business unit at Renesas, emphasized that this was not the case this time.
He said that the market in India itself was pivoting, with another government focus on incentivizing the semiconductor ecosystem in the country, plus the fact that the market was an inflection point where there is opportunity in the Indian market as well as internationally. Renesas was looking to form deeper partnerships in the ecosystem and do much more to enable companies such as Tata Motors to build more of the system solution in India itself.
The interview with Chittipeddi follows.
Nitin Dahad: Is this new partnership with Tata Motors simply to establish a design center, or what is the strategic thinking behind this?
Sailesh Chittipeddi: Unlike some of the other players in the semiconductor industry that have fairly significant R&D presence, in India, we had to think about this far more strategically than we had in the past. Tata is certainly a name brand bar none in India and certainly we’ve been working with Tata Elxsi on the automotive side. But the partnership with TCS (Tata Consultancy Services) is much more to move up the chain in terms of the system and the top–level platform kind of approaches that we can take to addressing various markets. As part of our discussions, Tejas Networks, a significant chunk of which is owned by TCS, and also in the process Sankhya Labs (which was acquired by TCS) play a key role as well. Essentially what we now have is an ability to work with these partners to form a full communications chain, if you will, and address market needs beginning with India and then certainly expanding to global markets. So, India is the primary focus, but certainly as Tejas expands its footprint globally in 4G and 5G we want to be working with them to be able to address those markets.
Nitin Dahad: It sounds like there’s a multi–faceted aspect to this whole story? Plus with all the recent acquisitions, what’s the strategy?
Sailesh Chittipeddi: The fact that we’re opening a joint innovation center also allows us to get the kind of talent that we need to get us to the next level without necessarily throwing more bodies at the problem. You want to get the right skill set into it because there’s a lot of people with a lot more bodies than us in India and they’ll continue to be. But for us, it’s more a question of how do you differentiate and get into that marketplace.
More broadly, there are mainly four divisions within Renesas: automotive, IoT, industrial, and infrastructure. Almost anything that we do falls into one of those four markets. If it doesn’t fall into one of those four markets, it’s probably unlikely we’ll do anything with it. Now, those markets are pretty large. But again, don’t expect us to be running out and buying a processor player and competing with a GPU company or a CPU company in any way, shape, or form — that would be suicidal. And by the same token, don’t expect us to jump headlong into a modem market for smartphones or things of that sort. That’s not our play or an apps processor play.
If you look at infrastructure, we’re primarily an attach play. That’s how you should think of us. If you look at the IoT, that’s where we are the broadest in terms of our portfolio and industrial. It’s primarily about MCUs, MPU, and our ASICS and sensor signal conditioning devices. Given our base of customers tends to be fairly significant business for us and the recent Reality AI acquisition fits beautifully into that strategy.
Nitin Dahad: Is the relationship with Tata Motors across the whole group? In the announcement you seem to focus on automotive.
Sailesh Chittipeddi: It’s not just strictly automotive. We led off with automotive because we [previously] announced a partnership with Tata Elxsi. But in general this is a far broader announcement than just the automotive piece. We are working with them on the infrastructure. We are working with them on the IoT arena with TCS especially. They have probably some of the best platform solutions, whether it comes to smart homes, smart cities, and so on and so forth. So, I think it provides us with a good advantage.
Nitin Dahad: And the joint system development solution development center in Bangalore that was announced a few months ago, is that well established already, and what’s the relation with this new announcement?
Sailesh Chittipeddi: The TCS one is new. We’re opening it in July. The Tata Elxsi center was very specific in terms of what they were working on. The new [TCS joint development] center will be a totally separate new center based in Bangalore [adjacent to the existing center]. We already have space, and it can be expanded. We expect to start off with roughly about 50 people expanding to about 150 people in about a year’s time. It’s co–located with TCS and it should be a very good opportunity for us to scale fast, which is something we definitely want to do given the search for talent globally.
Nitin Dahad: How are you going to be addressing the India market?
Sailesh Chittipeddi: We are going to be supporting Tata’s activity in the architecture development [for automotive] as stated in the announcement. Also, in terms of Tejas, as I said before, it’s more the signal chain development relative to what we need to do and then beyond that. In the IoT area it’s about platform development.
I think the Indian government’s initiatives to have more electronics development occur in India will certainly start to play a bigger role. And I think it’s an opportune time for Renesas to be participating in the market at this particular juncture, because the government is incentivizing a lot of industries, not only to manufacture, but also develop system solutions there. And I think we’ve started the work on our own a while back, but we’re now with this partnership, we’re getting a leg up.
Nitin Dahad: In your discussions with Tata, have you set yourselves revenue targets? What are the elements of your strategic agreement that you can say which is not announced?
Sailesh Chittipeddi: I can’t tell you much more I’m afraid. What I can tell you is, we certainly have a sales team already in India and as a result of this partnership, we will stretch more, set more aggressive targets for their own revenue growth. And certainly that’s the way we would view it in terms of jointly setting targets.
Nitin Dahad: Where do you see the biggest opportunity for Renesas to get some benefit from this relationship in India?
Sailesh Chittipeddi: I would say it depends on the time horizon. For the nearer term, I’d say most of the opportunities lie in the IoT and infrastructure area. Longer term, the opportunities will increase in the automotive area as the industry in India itself moves much more to electrification. I think that’s where the opportunities will be more significant over time because it’s still in its early innings and I think certainly with industrial we see that coming at around the same time.
Nitin Dahad: How long have you been in India already?
Sailesh Chittipeddi: We’ve been there for a long time. I’d say we had a small presence, as far as I remember, right from the origins of Renesas, which was in 2012, I think we’ve been there.
Nitin Dahad: What were your challenges previously that necessitated this new partnership with Tata?
Sailesh Chittipeddi: I think the biggest issue with the India market as a whole was in general it tended to be a market where the parts were spec’d and designed somewhere else and just put together under the Indian label, say a decade ago or so. And that largely has been the trend where they worked with either Chinese or Taiwanese manufacturers. And the systems were essentially labeled as Indian systems, but that’s changing. One of the things that caused us to go back and take a look at this was the fact that there’s more desire for content in India, if you will, and that’s driving the trend towards helping them put the systems together in India starting at the component level.
That was never the case before, and we find that trend is going to be increasing over time, especially as you see more EMS folks move into the India space. You will find more parts being spec’d by the Indian companies themselves. And I think that it’s the right time for us to move in and say let’s be the leader of the pack as opposed to be a follower and just set up a very big development center and so on that wouldn’t necessarily get us to where we need to go.
Not to name companies, but certainly there are several large phone companies that are moving some of their operations to India as well and manufacturing stuff there, so that certainly does open up an opportunity for people to get into the market. Let me put it this way, the easiest way to think about this, Nitin, is the market is pivoting in India. It’s getting to an inflection point. And the question for us is, are we going to be earlier or are we going to be late to the inflection point?
And I’d rather be early than be late in this one and Tata offered us a good opportunity to basically get to the inflection point with them and they’re the largest conglomerate outside of Reliance Jio in this marketplace. So, I think this presented a good opportunity for us and we’ve built relationships over a few years, and we think it’s the right time to do something like this.
Nitin Dahad: Let’s look at the bigger picture for Renesas. You recently acquired Reality AI. Tell us a bit more of the vision. I suppose everybody’s talking about endpoint intelligence and I guess that’s kind of where you’re going with this acquisition?
Sailesh Chittipeddi: The way you should think about Reality AI is that when you think about endpoint AI, the most congested traffic areas for lack of a better word are really in the voice and video, right? That’s where a lot of startups are and most of them are full stack companies, meaning they do the chip design, they do the algorithms, they do the tools, they provide the full chain, companies such as Syntiant for example. There are other companies out there that are doing something similar, but for us it’s more a question of how do we break the chain and then integrate with our own tool chains?
With Reality AI, the nice thing about it was they were focused very heavily in the industrial and automotive market, much more industrial and a little light on the automotive. But certainly, they have a very sweet spot in the industrial area and given our strength and industrial area, and the desire to create a full suite integrated with our software offerings we wanted, we were on the lookout for companies that would allow us to tackle the industrial market much more holistically. Reality AI had a good footprint and allowed us to get into that market and they were focused on things like HVACs. They were focused on things like mining equipment and so on.
And that is a sweet spot for us in general. Motor control, for example, where we’re very strong. So, this was a very natural complement. We were working with them before as a development partner, but now we felt that it makes sense given our concentration on the industrial market to be able to make them a part of our complete suite of offerings for our industrial customers. And then take it and integrate with our tool flow.
Interestingly, Reality AI have been in business for a while and the other nice thing about them was they had an established base of industrial customers in Japan. They also have their tool support based in Japanese language, which I thought was really interesting for us given the strength of what we have already.
Nitin Dahad: What’s next on the horizon for acquisition? What’s missing in your corporate presentation?
Sailesh Chittipeddi: Obviously we can’t talk about what we plan on doing from an acquisition perspective. What I will say is, our core competencies will continue to be embedded processing. We’ve built four modes, if you will, one in the power domain, one in the connectivity domain, one in sensors, and one in actuation. That’s our capability. It’s basically competencies around IoT that that we need to build and on the other side it’s really about embedded AI software and security and user experience. So, if you bound it in that area, that’s kind of where we will be, we won’t be a conglomerate. Let me assure you.
We won’t be offering a multitude of catalog parts like some of our competitors do. We will certainly have a broad portfolio, don’t get me wrong, but we’ll never be somebody that you’re going to for 150 parts with all different variants. That’s not our game.
Nitin Dahad: You also recently invested in Arduino, tell us about that.
A big part of this was really to leverage the ecosystem that Arduino has. They have some of the broadest range of ecosystem users and we want to increase this. I would say more from an MPU perspective or processor perspective, Arduino has a much more broader base of users [compared to for example Raspberry Pi] and certainly it was attractive from that perspective for an investment again. For us, we view it as the ability to get an early view of what’s happening in that ecosystem and position ourselves well to take advantage of it with 30 million users, they have a huge ecosystem we’d like to tap into.
Nitin Dahad: Sailesh, thank you.
Sailesh Chittipeddi: Thank you