Semiconductor Stocks In India: Rise Beyond The Silicon Valley

Semiconductor stocks in India- Does this seem like a new and modern topic? Well, the answer is Not really. Do you know that India dreamed of becoming a semiconductor powerhouse of the world during the 1960s-70s? Interesting huh! Can you imagine that when India was trying to overcome post-independence challenges, a company dared to dream about it?

You heard that right. A company named ‘Semiconductor Complex Limited’ was on its way to design and manufacture leading-edge circuits and electronics. The SCL got the green flag from the then Prime Minister Indira Gandhi to start the manufacturing unit in Mohali, Punjab, India. We were ahead in the game as none of the countries like China, Taiwan, or Israel even existed in the race. Unfortunately, a massive fire in the SCL burned India’s dream of becoming the flag bearer of this race.

But that’s the past, right and we can not dwell on it. 50-60 years later, India is again ready to set the stage. India’s consistent efforts towards Aatmanirbharta have given us the confidence to take charge of its semiconductor manufacturing strategies. So, can you guess which Semiconductor stocks in India can benefit from this revolution? Without further ado, let’s dive into the discussion.

Read the full story: When India’s dream of becoming a semiconductor powerhouse was shattered!

What are Semiconductors and why are they important?

Semiconductors are materials that have properties that are between those of a conductor and an insulator. They can conduct electricity under certain conditions and act as an insulator under others. These materials are crucial components in electronic devices, serving as the foundation for modern technology.

Semiconductors are essential for many electronic devices, such as smartphones, laptops, televisions, and medical equipment. They enable the manipulation and regulation of electrical signals and the building of electronic circuits.

Semiconductors are important for the following reasons:

1. Enable the manufacturing of electronic devices, driving innovation and productivity in various industries.
2. Support the development of telecommunications infrastructure, facilitating communication and connectivity.
3. Contribute to the growth of the IT sector by powering computers, servers, and networking equipment.
4. Drive advancements in healthcare through medical devices and diagnostic tools.
5. Enable automation and efficiency improvements in manufacturing processes.
6. Facilitate the transition to renewable energy sources through solar panels and wind turbines.
7. Support the growth of the automotive industry through electronic components in vehicles.
8. Stimulate research and development in materials science and nanotechnology.
9. Create employment opportunities in semiconductor manufacturing, research, and related industries.
10. Enhance national competitiveness and attract foreign investment in technology sectors.

Initiatives & Policies- The path ahead

Despite India’s global leadership in semiconductor chip design, it heavily relies on imports for almost 100 percent of its semiconductor needs. Official data from the Department of Electronics reveals a significant surge in India’s semiconductor chip imports, soaring from Rs 67,497 crore in 2020-21 to Rs 129,703 crore in 2022-23.

As per IBEF, India ranks as the second fastest-digitizing economy among the 17 leading economies worldwide. The Government of India targets positioning Electronics Goods among India’s 2-3 top-ranking exports by 2026. Projections indicate that Electronics Goods exports will surge from an estimated US$ 15 billion in 2021-22 to reach US$ 120 billion by 2026.

Government initiatives like ‘Digital India’ and ‘Make in India’ have simplified the process of setting up manufacturing units in India. These initiatives are coupled with favorable FDI policies for electronics manufacturing. The production-linked incentive (PLI) schemes have attracted investments worth Rs. 6,887 crore (US$ 833 million) for large-scale electronics manufacturing, surpassing the FY24 target of Rs. 5,488 crore (US$ 664.4 million) by June 2023.

Read more about India’s Semiconductor Sector: Tracking Government Support and Investment Trends.

Industrial Trend: Semiconductor stocks in India

As per the reports by IBEF, India has strong capabilities in designing and researching auto electronics and industrial economics. Also, it’s the second-largest producer of mobile phones globally and is expected to be the fifth-largest consumer of electronic products by 2025. With this rising demand, India’s electronics system design & manufacturing (ESDM) sector is projected to hit around US$ 220 billion by 2025, growing at 16.1% annually.

In fiscal year 2023, electronic goods exports surged to US$ 23.57 billion, up by 50.52% compared to US$ 15.66 billion in FY22. The Union Budget for 2023-24 allocated Rs. 16,549 crore (US$ 2 billion) for the Ministry of Electronics and Information Technology, up nearly 40% from the previous year’s budget.

Additionally, Rs. 3,000 crore (US$ 363.4 million) was earmarked for the Indian Semiconductor Mission in the same budget. It is expected to ignite the development of semiconductor and display manufacturing in India.

India aims to achieve US$ 300 billion in electronics manufacturing and exports by 2025-26, with significant potential in artificial intelligence (AI). AI is projected to contribute US$ 967 billion to the Indian economy by 2035 and US$ 450–500 billion to India’s GDP by 2025.

Semiconductor Stocks in India

The best Semiconductor Stocks in India are Bharat Electronics Ltd, Vedanta Ltd, Tata Elxsi Ltd, ABB India Ltd, HCL Technologies Ltd, Spel Semiconductor Ltd, ASM Technologies Ltd, Dixon Technologies (India) Ltd, MIC Electronics Ltd, and RIR Power Electronics Ltd.

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Let’s Explore Some Of The Semiconductor Stocks in India

Bharat Electronics Ltd

Bharat Electronics Limited (BEL) is a leading manufacturer and supplier of strategic electronic products primarily serving Defense Services. The company specializes in a wide range of tasks. Strategic electronic product and system design, development, manufacture, supply, and life cycle support are included.

In the fiscal year 2019-20, BEL made significant investments amounting to Rs 51,297 Lakhs in CAPEX. It is done to focus on modernizing plant and machinery, upgrading test instruments, investing in research and development, and enhancing infrastructure.

During FY 2022-23, BEL acquired technology from DRDO for high-capacity Lithium-ion cells. The move is essential for strategic applications, and establishing a production facility for these cells. The company designated Li-ion batteries and fuel cells as its focus areas. Furthermore, it established a specialized micro Strategic Business Unit (SBU).

3-Year Performance:

-Profit Growth Compounded: 18%
-CAGR for Stock Price Growth: 65%
-Growth in Compound Sales: 11%
-Equity Return: 21%

Twelve-Month Trailing Period (TTM) Performance:

-Profit Growth Compounded: 29%
-CAGR for Stock Price: 105%
-Growth in Compound Sales: 3%
-Equity Return: 23%

The reliable and uniform growth positions BEL as a long-term player in the Semiconductor sector.

Read the full analysis here: Bharat Electronics Limited Share Soar To New Heights: The Analysis.

Vedanta Ltd

Vedanta is a prominent global natural resources and technology conglomerate. They have a presence in India, South Africa, Liberia, and Namibia. As of March 31, 2022, the company boasts 48 subsidiaries, comprising 13 direct and 35 indirect entities.

Now, Vedanta is thinking of doing something new: making semiconductors. The company has added Semiconductors and Display Glass ventures to its portfolio. They want to team up with Foxconn, a big electronics company from Taiwan, for this. They’re planning to spend a huge billion on two separate units: one for making chips and the other for making displays. If this occurs, India will enter the semiconductor industry for the first time, which is significant for the nation’s technological advancement.

In addition, Vedanta aspires to lead the way in promoting social justice, the environment, and sound governance.  They aim to reduce their carbon emissions and reach net zero by 2050 or earlier. They’re ready to spend billions over the next ten years to make this happen faster. It’s all about making Vedanta a more eco-friendly and responsible company. Read the full analysis here: Vedanta Fundamental Analysis: Risk Assessment

3-Year Performance:

-Profit Growth Compounded: -10%
-CAGR for Stock Price Growth: 6%
-Growth in Compound Sales: 20%
-Equity Return: 24%

Twelve-Month Trailing Period (TTM) Performance:

-Profit Growth Compounded: -65%
-CAGR for Stock Price: -6%
-Growth in Compound Sales: -2%
-Equity Return: 20%

The growth-oriented vision of Vedanta Ltd makes it a significant player in the semiconductor mission of India.

Tata Elxsi Ltd

Tata Elxsi Limited, a subsidiary of the esteemed TATA Group, is a global leader in design and technology services.  The organization has experience in healthcare, communications, broadcast, automotive, and transportation. Thus positioning it among the top design and technology services providers worldwide.

In the semiconductor and electrical device market, new technologies such as artificial intelligence (AI), machine learning (ML), and natural language processing (NLP) are driving significant growth. Tata Elxsi is at the forefront of this Semiconductor advancement.

Tata Elxsi empowers its clients through framework optimization, application-specific AI implementation, and optimized AI models. These strategies enable clients to harness the full potential of AI technology, even in low-footprint solutions.

3-Year Performance:

-Profit Growth Compounded: 43%
-CAGR for Stock Price Growth: 40%
-Growth in Compound Sales: 25%
-Equity Return: 37%

Twelve-Month Trailing Period (TTM) Performance:

-Profit Growth Compounded: 12%
-CAGR for Stock Price: 25%
-Growth in Compound Sales: 17%
-Equity Return: 41%

The esteemed company has a significant role in India’s semiconductor resolution.

Spel Semiconductor Ltd

Spel Semiconductor Ltd is the next stock on the list of semiconductor stocks in India. It is India’s premier semiconductor IC Assembly & Test facility in Chennai. The company expanded its product offerings by introducing 56-pin and 80-pin ICs, enhancing its capacity to meet the rising demand for diverse IC types. 

Spel semiconductors have captive generation capability for critical process inputs, ensuring uninterrupted operations. It boasts a robust power redundancy system, with a 200% backup to safeguard against disruptions.

In terms of packaging capabilities, Spel excels in Leaded & QFN packages. As India’s first and only OSAT facility, Spel’s clear package roadmap includes the introduction of further high-end packages.

Moreover, Spel entered into a technical collaboration with Computer Resources, US, for a magnetic media project to produce computer tapes and floppy discs.  Additionally, on November 1st, 1995, Spel transitioned into a 100% Export-Oriented Unit (EOU) under the Electronics Hardware Technology Park Scheme. This strategic move enabled Spel to focus on expanding its global footprint through product exports.

3-Year Performance:

-Profit Growth Compounded: 76%
-CAGR for Stock Price Growth: 109%
-Growth in Compound Sales: -33%
-Equity Return: -4%

Twelve-Month Trailing Period (TTM) Performance:

-Profit Growth Compounded: 240%
-CAGR for Stock Price: 228%
-Growth in Compound Sales: -25%
-Equity Return: 11%

Also read: Small Cap Index: Opportunities And Risks For Investors

RIR Power Electronics Ltd

Ruttonsha is a manufacturer specializing in traditional semiconductor devices like bridges, power modules, diodes, rectifiers, and thyristors. RIR, a global semiconductor company, boasts over five decades of collaboration with International Rectifier, USA, for producing power semiconductors. The company aims to develop and deliver cutting-edge products and solutions across the power electronics ecosystem.

RIR is uniquely positioned in the private sector as the only company manufacturing semiconductor devices from the diffusion stage. In 2019, they became distributors for StarPower Semiconductor Ltd.’s IGBT Modules. Additionally, they designed and developed a 12V, 10000A Rectifier for the Demagnetization process at Hindalco, Hirakud Smelter, and Sambhalpur, among other projects.

In 2021, RIR Power Electronics Ltd designed and developed a 200V, 3200A Rectifier for Electro Chlorination Process at 800MW North Chennai STPP Stage III, Ennore, one of India’s largest Electro Chlorination facilities.

Furthermore, Ruttonsha also designed and developed a 60V, 2000A Rectifier for Green Hydrogen and commissioned it at 15MW Kadodiya, Ujjain. These initiatives underline RIR’s commitment to innovation and advancement in the semiconductor industry.

3-Year Performance:

-Profit Growth Compounded: NA
-CAGR for Stock Price Growth: 156%
-Growth in Compound Sales: NA
-Equity Return: NA

Twelve-Month Trailing Period (TTM) Performance:

-Profit Growth Compounded: -9%
-CAGR for Stock Price: 160%
-Growth in Compound Sales: 17%
-Equity Return: 20%

The company has experienced not-so-good performance in recent years. However, it can benefit from the Semiconductor Mission in India in the upcoming years.

Also, Exploring The Best Green Energy Stocks For The Future

Closing the Chapter: Final View on the Semiconductor Stocks in India

In wrapping up, we have discussed the key players in the Semiconductor segment. These stocks have the potential to grow further backed by this revolution. The Semiconductor Mission in India, also known as Semicon India, has set the stage for making India a major hub for making and designing electronic stuff. Government schemes like the Make-in-India policy and Production Linked Incentive (PLI) for large-scale electronics manufacturing have allowed these companies to grow. A dream India envisioned in the 1960s and 70s seems to be on the verge of realization.

The New India is poised to become a semiconductor powerhouse. With increased foreign investments, the development of semiconductor manufacturing units domestically, and revised guidelines, the Semiconductor stocks in India hold tremendous potential for growth.

That’s all for today’s post. Hope you get some valuable insights from here.

Happy reading!

Disclaimer

The blog is meant for informational purposes and serves the general analysis of the stocks. The contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over a while. The post does not consist of any direct recommendation about Investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfill their responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.