Rightways: IC designer Oppstar focuses on talent, IPO offers good value for money

Saturday, March 4, 2023

IC designer Oppstar focuses on talent, IPO offers good value for money

Oppstar is one the few Malaysian companies in the front-end of the semiconductor industry, offering a full spectrum of IC design services. The chips we design play a prominent role ushering in a new era of digitalization and are used in various industries including telecommunication, consumer electronics, industrial electronics and automotive.

Oppstar was founded in 2014 by three IC design industry experts, with the vision to become a preeminent global Semiconductor brand in R&D.

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“We would like to grow by double digits for our top and bottom line. our talent is our asset and our retention strategy is to pay them a competitive market rate.” Ng Meng Thai

WHILE Malaysia is known as having a strong base in the semiconductor industry, there are not many companies that operate in the higher parts of the sector’s value chain.

That is beginning to change, as a small number of companies are making a successful business out of designing integrated circuits (ICS).

IC designers, as they are called, design chips which are then tested out and manufactured by other parties.

One such IC designer in Malaysia is Oppstar Bhd, which is slated to be listed on the ACE Market in the middle of this month.

Its upcoming listing will see it raising funds mainly for the purpose of hiring more professional engineers.

This is a departure from the norm in the country’s public listing companies’ inclination where most of the funds raised would usually be channeled towards capital expenditure initiatives such as to build factory capacity or to acquire a fixed asset.

IC designers don’t need such assets as their value is in chip designing, which in turn is done by their engineering talent.

Investing in talent would help Oppstar expand its capacity to take on more projects and boost its competitive edge.

The company says it also aims to develop intellectual property (IP) assets with these new hires. The IP is meant to lead to additional income and at the same time improve its market profile.

In its prospectus, Oppstar says some of the IPS it aims to develop are for the RISC-V (or risk-five) based system on a chip. Such a system enables artificial intelligence and machine-learning applications to run on chips.

“These are technical terms in the industry but we can license these IPS separately or incorporate the IPS into future IC design projects,” Oppstar’s chief executive officer Ng Meng Thai tells Starbizweek.

The company would also like to expand into “post-silicon validation services” which would complement its IC design business.

The move would help improve its standing among its peers, says Ng, adding that all these plans would enable it to continue on its strong growth trajectory.

“We would like to grow by double digits for our top and bottom line. Our talent is our asset and our retention strategy is to pay them a competitive market rate,” Ng says.

Oppstar aims to more than double its engineering headcount to 500 from 220 presently and this effort would take up close to half of the funds or Rm50mil raised from its initial public offering (IPO).

Ng claims that demand for the company’s expertise is strong as it wants to expand its geographic reach to India, Singapore and Taiwan with the allocation of about a quarter or Rm25mil of the IPO proceeds.

“From time to time, we receive enquiries from customers. For the next three years or so, we would still need to continue to go out to find more customers to consume our capacity of 500 staff,” he says.

Its customers comprise integrated device manufacturers, fabless and fablite companies, electronic system providers and other IC design houses.

End-industries that require such expertise are the consumer electronics, telecommunications, industrial electronics and automotive sectors.

Its financials showed a gross profit margin of close to 60% and net profit margin of 33% in the financial year 2022 (FY22).

The company says its strong margins are driven by having turnkey design service projects, which command better margins when compared to specific design services.

As at the time of its prospectus issuance, Oppstar’s order book stood at Rm34.29mil, which mainly consists of turnkey design services and is expected to be recognised in the next 12 months.

With zero borrowings, Ng says the company will be in a good position to quickly capture opportunities and have these delivered to its bottom line immediately.

Notwithstanding that, retaining its talent that grants it its competitive advantage is key to its sustenance.

“We notice that younger talent are a bit different in valuing a job from what was considered as good 10 to 20 years ago, as workers then tend to value jobs from multinational companies (MNCS).

“Younger engineers surprisingly now would like to try all the different IC designs before locking themselves down in their career,” he says.

“If you go to an MNC, you would be focused on a very niche and narrow field in IC design. But since we have a broad customer base, our engineers will have the opportunities to experience a variety of design work.

“Also we have overseas customers as some 80% of our revenues are from overseas, so there are a lot of travelling opportunities for them as well,” Ng adds.

He points out that some 14% of the company’s public issue of new shares would be available for its eligible directors, employees and business associates who have contributed to its success.

“This would help us retain some of our talent for the longer term. Last year, we saw a low single-digit rate in the turnover of our manpower.

“The original team of the three founders that started the company have stayed on until now and we grew the employee count to about 220 currently,” he adds.

The company is also eyeing other growth opportunities such as through joint ventures and inorganic ones after its listing.

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