The semiconductor industry is the backbone of modern electronics, including smartphones and computers to EVs and processing units for artificial intelligence. Taiwan stands at the top of the semiconductor industry as the undisputed leader, with its Taiwan Semiconductor Manufacturing Company (TSMC) at the forefront.

However, there has been a growing interest in the semiconductor market in India due to increased demand for electric vehicles and infrastructural development. The Interim budget for 2024-25 has allocated a budget of Rs. 6,903 crores compared to the previous year of Rs. 3,000 crores.

Taiwan: The current semiconductor hub

Taiwan holds 67% of the global market share in the semiconductor industry, whereas TSMC alone has around 53% market share.TSMC primarily drives Taiwan’s presence in the semiconductor industry. Its top 10% of customers accounted for over 90% of its total net revenue from the previous financial year. Those customers include MediaTek, AMD, Qualcomm, Broadcom, Sony, Nvidia and more. 

On average the company spends around USD 20 billion dollars on research and development. However, the company has decided to invest over USD 100 billion over the next three years to expand its capacity and maintain its technical lead. It is currently budgeting capex of USD 28 billion to USD 38 billion for the current financial year. 

Note: If you want to learn Candlesticks and Chart Trading from Scratch, here’s the best book available on Amazon! Get the book now!

telegram channel

India’s Aspirations & Challenges

In India by 2021, the government launched a PLI scheme for companies called – “Modified Scheme for semiconductors and display fabs” with a budget of Rs. 76,000 crores. It supported 50% of project cost and capital expenditure on a pari-paasu (equal footing) basis for setting up fabs. India’s semiconductor industry is expected to grow at a compounded annual growth rate (CAGR) of 20.1%, expected to reach USD 100.2 billion dollars by 2032 from USD 34.3 billion in 2023.

As already established, India recognizes the strategic importance of developing a domestic semiconductor manufacturing capability. Similarly, the National Policy on Electronics includes specific measures to attract investment and foster a conducive environment for semiconductor manufacturing.

There has been an increase in fabless semiconductor manufacturing – the company designs, develops, markets, and sells the chips but does not manufacture them in-house. Some main players in India include Tata Elxsi, Dixon Technologies, ASM Technologies, MosChip, RIR Power Electronics, Vedanta, and more. 

A diverse range of companies characterizes the Indian semiconductor industry, each focusing on specific segments such as automotive, logic, processors, computers, and electronics. These companies are categorized into various groups based on their product offerings and expertise. For example, Moschip Technologies specializes in fabless semiconductor manufacturing, ASM Technologies specializes in designing, prototyping, and manufacturing, and Vedanta manufactures 28-30 nm chips.

Current Landscape of the Indian Semiconductor Companies

The Indian semiconductor industry has been gaining momentum in recent years, driven by the government’s initiatives. Even then these companies are still new, and existing companies are only recently entering the semiconductor business. Due to this, semiconductor companies are still volatile in nature.

The Indian semiconductor industry is still heavily dependent on imports which can be a major constraint in the growth of the industry. India’s imports of electronics, telecom, and electrical products came up to around USD 89.8 billion in 2023-24, but around 50% of those were imported from China and Hong Kong. These imports are also the result of the semiconductor shortage which came due to COVID-19. 

This deep-seated dependency on these two countries can cause India to face serious problems regarding its strategic autonomy and economic security. The Indian government has recognized the need to reduce this dependency and is taking steps to enhance domestic production capabilities. The “Modified Scheme for Semiconductors and Display Fabs” aims to support the establishment of semiconductor fabrication plants in India, providing fiscal support of 50% of project costs through a pari-paasu arrangement.

To address this issue, the government is encouraging local manufacturers through tax breaks, easier access to capital, and infrastructure development. Collaborations with international technology firms for technology transfer and joint ventures could also prove beneficial. HCL Technologies is pursuing a JV with Foxconn (a Taiwanese electronics manufacturer) to set up an outsourced semiconductor assembly and testing (OSAT) unit in India.

Companies like Tata Group, Texas Instruments, etc are interested in the government’s bid for the overhaul of its semiconductor laboratory in Mohali. AMD an American Multinational semiconductor giant inaugurated its largest global design center – the Technostar research and development campus in Bangalore as a part of the USD 400 million investment over the next five years.

As part of the India AI program, the government plans to establish a powerful GPU cluster. This cluster will support the growth of startups actively pursuing innovation in artificial intelligence models. The government will allocate Rs. 1,100 – 1,200 crores for this initiative. This funding is part of the design-linked incentive (DLI) scheme. The investment aims to foster AI development and boost India’s global AI presence.

The USD 2.75 billion Semiconductor Project – Micron Technologies Ltd (USA)

Micron Technologies being the 5th largest semiconductor company in the whole world is coming to India. The Prime Minister himself had invited the company to boost the semiconductor manufacturing in India. On June 28, 2023, Micron Technologies entered into a Memorandum of Understanding (MoU) with the Gujarat Government in India. Spanning across 93 acres they agreed upon a USD 2.74 billion investment at Sanand GIDC-II industrial estate.

The company has invested about USD 825 million and the rest will be provided by the government as subsidies. The project is called the Assembly, Test, Marking, and Packaging (ATMP) facility. Tata Projects has secured the contract to build the ATMP facility.

This project will be split into two parts where phase one has already employed over 200 employees which is estimated to be completed before the FY2025. In the upcoming years after its completion, it is expected to employ around 5,000 people. The second phase of the project is to be started in the ongoing decade. The USD 45 billion smartphone industry will benefit from this as many blue chip companies like Apple have shown interest in India in its growing semiconductor industry.

Also read…

Top Listed Indian Semiconductor companies

#1 Dixon Technologies (India)

Dixon Technologies, Founded in 1993 has been the leader in the Electronic Manufacturing Services (EMS) industry. Their diversified portfolio includes products like consumer electronics, home appliances, lighting products, mobile phones, CCTVs, wearables, and refrigerators. So why does this come under the semiconductor industry?

As mentioned earlier it is part of the EMS industry which means it acquires its semiconductor components from foreign countries and assembles phones and other appliances that require semiconductors. The company’s main customers are Samsung, Xiaomi, Panasonic, and Philips.

ParticularsAmtParticularsAmt
CMPRs. 9,620Market Cap (Cr.)Rs. 57,550
Stock P/E (TTM)156EPS (TTM)Rs. 61.5
RoE (%) (TTM)24.70%RoCE (%) (TTM)28.70%
Promoter Holdings (%)33.40%FII Holdings (%)17.80%
Debt-to-Equity (TTM)0.29Interest Coverage Ratio (TTM)7.61
Current ratio (TTM)1.02Net profit margin (TTM)2.12

#2 Moschip Technologies

Moschip Technologies is a publicly traded semiconductor system design and services company headquartered in Hyderabad, India. Founded in 1999, the company has more than two decades of experience in semiconductor materials and SoCs for a variety of applications. Moschip excels in the manufacture of semiconductor devices, bringing innovation and technological breakthroughs to the industry.

Focusing on turnkey ASICs, mixed-signal IP, semiconductor product engineering, and IoT solutions, the company caters to industries as diverse as aerospace and defense, consumer electronics, automotive medical, and networked telecommunications MosChip has shipped millions of integrated IC and Smart Lighting, Smart Metering, Asset Tracking and other IoT solutions have excelled at volume. The company offers a range of services including RTL design, certified design, physical design, and analog design using leading-edge EDA tools and proven methodologies.

ParticularsAmtParticularsAmt
CMPRs. 163Market Cap (Cr.)Rs. 3,071
Stock P/E (TTM)311EPS (TTM)Rs. 0.53
RoE (%) (TTM)5.17%RoCE (%) (TTM)6.62%
Promoter Holdings (%)47.30%FII Holdings (%)2.80%
Debt-to-Equity (TTM)0.26Interest Coverage Ratio (TTM)2.88
Current ratio (TTM)1.71Net profit margin (TTM)3.36%

#3 RIR Power Electronics

RIR Power Electronics is a global semiconductor company specializing in the development and manufacturing of high voltage semiconductor devices and high power devices Established in 1969. The company manufactures phase control and inverter grade thyristors, standard and fast recovery diodes, power modules, and high voltage modules, diode bridge rectifiers, IGBTs It offers a wide range of products such as modules.

These products cater to various industrial applications such as power generation, railways, automotive, industrial, and industrial. With a strong presence in India and exports to international markets, RIR Power Electronics Limited is a leading company in the semiconductor industry.

ParticularsAmtParticularsAmt
CMPRs. 1,627Market Cap (Cr.)Rs. 1,132
Stock P/E (TTM)161EPS (TTM)Rs. 10.1
RoE (%) (TTM)14.70%RoCE (%) (TTM)13.30%
Promoter Holdings (%)69.70%FII Holdings (%)0
Debt-to-Equity (TTM)0.54Interest Coverage Ratio (TTM)8.6
Current ratio (TTM)3.05Net profit margin (TTM)10.50%

#4 CG Power & Industrial Solutions

CG Power & Industrial Solutions Ltd is the first Indian company to recently venture into the semiconductor industry. The company has partnered with Renesas Electronics Corporation and Stars Microelectronics Public Company Limited to set up an Outsourced Semiconductor Assembly and Test (OSAT) facility in Sanand, Gujarat, India. Expected to be operational over the next 2.5 to 3 years, the facility will produce a wide range of semiconductor products, including proprietary and advanced demanded by automotive, consumer, industrial, 5G, and other industries primarily through the project.

ParticularsAmtParticularsAmt
CMPRs. 652Market Cap (Cr.)Rs. 99,552
Stock P/E (TTM)116EPS (TTM)Rs. 9.34
RoE (%) (TTM)35.60%RoCE (%) (TTM)47.00%
Promoter Holdings (%)58.10%FII Holdings (%)15.20%
Debt-to-Equity (TTM)0.01Interest Coverage Ratio (TTM)449
Current ratio (TTM)1.66Net profit margin (TTM)10.60%

Other Semiconductor Stocks

NameCMP (Rs)Market cap (Rs. in Crore)Stock P/E (TTM)RoA %EPS (TTM)
HCL Technologies1,4303,87,97324.716.357.9
Tejas Networks Ltd1,05818,0612871.073.69
Genus Power Infrastructures Ltd2898,7851173.42.47
Syrma SGS Technology Ltd4307,62970.54.026.04
MIC Electronics Ltd46.41,02718.651.62.79

Conclusion

In Conclusion, with government initiatives like the Rs. 76,000 crore “Modified Scheme for Semiconductors and Display Fabs” and a booming domestic market projected to reach USD 100.2 billion by 2032, the growth potential is undeniable. However, achieving this vision requires collaboration. By working together, the government, industry leaders, and global partners can leverage India’s design expertise and foster an innovation-friendly ecosystem.

This collaborative approach will not only reduce import reliance and attract investments in chip fabs but also propel India towards becoming a global leader in semiconductor design and manufacturing. The decisions made today will shape India’s technological and economic future for years to come. By seizing this opportunity, India can build a future-proof economy that is self-reliant and at the forefront of technological innovation.

Written by Rithesh Balaji

By utilizing the stock screenerstock heatmapportfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks, also get updated with stock market news, and make well-informed investments.


Start Your Stock Market Journey Today!

Want to learn Stock Market trading and Investing? Make sure to check out exclusive Stock Market courses by FinGrad, the learning initiative by Trade Brains. You can enroll in FREE courses and webinars available on FinGrad today and get ahead in your trading career. Join now!!