Dixon Technologies Plans To Invest $600 Million In Upcoming Display Fab Unit In Noida

Leading electronic manufacturing services (EMS) player Dixon Technologies is banking on government schemes such as the India Semiconductor Mission (ISM) 2.0 to fund its upcoming display fabrication facility, according to Saurabh Gupta, Chief Financial Officer of the company.

The Noida-based company will invest about $600 million in the new facility, while around $200 will be invested by its equity partners.

In a conversation with NDTV Profit, Gupta explained how the upcoming display fab unit will be funded. “50% is generally given on a pari passu (on an equal footing) basis by the central government. And the state government generally gives around 25%, whichever state you plan to set those capacities. So, the balance is 25%. Within that 25%, we feel our equity partner should also bring in around 25-26. Our outflow effectively will be only 75% of that 25%. So, it will not be such a large outflow," he said.

He said if the total capex is $3 billion, then after a 75% subsidy by the government, a further amount of around $800 million will be required. Out of this, 26% will be funded by an equity partner.

“So we are talking about effectively $600 million, which has to be done over a period of 3 years by us. And the math is very good. It can generate decent revenues and Ebitdas of almost 20% of the revenues,” he said.

Setting up the display fabrication (fab) unit will bolster the company’s position in the electronics components sector. Dixon Technologies aims to localise production and reduce reliance on imports, mostly from China. Setting up the new facility will also give the company the first-mover advantage in display fab manufacturing.

Gupta noted that the entire plan is contingent on the government launching the Indian Semiconductor Mission (ISM) 2.0.

"Only when they roll out, then we will definitely decide to go ahead with this display plan. But, as far as our existing component PLI (Production Linked Incentive) is concerned, we are getting into the display assembly of mobile phones, IT hardware, and also looking to get into the camera modules," he said.

During its third quarter earnings call, the company said it is in discussion with a global technology company to set up a display fabrication unit with an investment of nearly $3 billion. 

Government schemes such as PLI and ISM are important for building the display manufacturing industry in India, according to Gupta.

“For display fab, I think some government support is required. And that is not only the case in India. Globally also, if you look at any large semiconductor capacities or display capacities, a large amount of that is supported by the government, either in the form of equity participation or some kind of subsidy, which the current existing government in India is also trying to do,” he said.

“So we feel it's a large opportunity because India imports almost $11 billion worth of displays now. And that number is expected to go to $23 billion,” he added.

Shares of Dixon Technologies were trading 1.77% lower at Rs 13,064.15 apiece on the NSE at 3:08 pm on Wednesday, compared to the benchmark Nifty remaining flat at 22,474.90, up 0.1%.