'Bengaluru Will Saturate': This Rs 1,000-crore Chip Design Company is Setting Up Bases in Tier 2 Cities

After catering to global semiconductor manufacturers for over two decades, Bengaluru-based chip designing firm Tessolve is looking to expand its footprint in India, particularly in the tier 2 and tier 3 cities of the country.

Along with tier-1 cities, the Bengaluru-headquartered company has its centres in cities like Coimbatore, Bhubaneswar, Kochi, and Hubballi.

“Bengaluru will saturate in some time. We are growing at double digit every year,” said cofounder and chief executive of Tessolve Srini Chinamilli in an interaction with Outlook Business.

He says the company had a good success rate in tier-2 and tier-3 cities in terms of hiring, which prompted it to open centres in these areas.

“(People from these cities) are very talented and hardworking. They're more loyal to the company,” he said.

Karnataka government has recently allocated Rs 160 crore to prompt startups in the semiconductor space to expand beyond the state capital, to cities like Mangaluru, Mysuru and Hubballi.

Talking of the comapany’s India business, Chinamilli says it currently contributes less than 10% to the overall revenue. However, the company has started to have more local business as the semiconductor ecosystem is evolving in the country.

Last year, Tessolve had achieved a worldwide revenue of Rs 1000 crore in 2023-24.

Chinamilli says Tessolve had started out to cater to the Indian market in 2004 but turned to overseas business due to weak domestic demand. “Twenty years back, we were a little bit too early to the game,” he recalls.

Tessolve relied on the Silicon Valley in the US and Europe for business, and started building the infrastructure to cater to the world wide requirements, the CEO says.

While the Hero Electronix-backed company has not applied for any government incentives like PLI for chip making and DLI for chip designing, it is optimistic that the government’s support to the chip manufacturing sector will help accelerate big players to start operations in India.

“Earlier, OSAT (outsourced semiconductor assembly and test) facilities were all in Singapore, Malaysia, Taiwan, and other places. Now some companies have announced plans to start in India. So we're getting more local engagements now,” Chinamilli says.

Chinamilli, however, did not reveal details, but said that the company was at different stages of talks with firms involved in the upcoming chip manufacturing projects in India.

“A lot of them (companies) are talking to us. We will be announcing things in a short time, but right now these are all under the wraps,” he says.

Following the trend, Tessolve is also experiencing a surge in demand from AI-based companies for its services worldwide. The other demand driver is the automotive sector.

“All the data center companies are transforming into AI-enabled data centers. Then there is a lot of AI being deployed at the edge, whether it's in your cell phone or computer or any other smart device. Another is the automotive sector, where a lot of cars are becoming autonomous. Chips are at the heart of all these electronic systems, he says.

But the pure India-based demand was still at a nascent stage, he says.

He says India should use its large engineering force in the semiconductor industry and the government should provide risk capital, increase private public partnership, and have a large fund to support companies coming in the chip manufacturing space in India.

“What is needed is a little more risk capital. A semiconductor company requires a lot of capital to get started. But we don't have as much venture capital or private equity money coming into this kind of industry. So the government can set up a large venture capital fund,” he advises.