Foxconn Edge of India's Top Semiconductor Stock 

In 1947 a group of researchers at Bell Labs, a subsidiary of AT&T, invented the transistor, a switch that controls electric current.

Within decade researchers were placing several transistors on a slab of silicon to make a chip.

A thriving industry grew up around California, outsourcing low-value tasks, such as chip assembly, to Asia, where labour was cheaper.

Innovation came quickly. In 1965 Gordon Moore, who later co-founded Intel, America's chipmaking giant, correctly predicted that by shrinking transistors, engineers would be able to double the number that fit on a chip every two years.

As the market grew, so did interest from America's rivals.

Japanese firms such as Toshiba and Fujitsu managed to take a share of some chip markets.

Decades later China's tech titans reduced the country's dependence on foreign chips. Instead of focussing on innovation, China's big priority was to emulate Taiwan. Companies in the latter, particularly, Taiwan Semiconductor Manufacturing Company (TSMC), produce 90% of the world's premium chips till date.

What is important to note is that along with low value apparels and home goods, the growth in semiconductor exports contributed massively to Chinese economy over past few decades.

In 2024, the value of the global semiconductor industry is over US$ 500 bn. It is dominated by the US, with 47% share, followed by Taiwan, South Korea, Japan, and Europe.

In 2021, the Indian government launched the Indian Semiconductor Mission (ISM) to break into the industry in a big way.

The goal of the ISM is bold. It aims to create an end-to-end semiconductor and electronics ecosystem in India. This includes large chip fabrication plants.

So, the government has offered a US$ 10 bn (Rs 760 bn) production linked incentive (PLI) scheme. The scheme aims to attract private investment of up to Rs 1.7 trillion to India.

Until 2021, India's chip manufacturing capacity was heavily dependent on China. Nevertheless, a few Indian companies had already grown into global leaders when it comes to chip design and research.

Thanks to the ready pool of talent in IITs and NITs, all major global semiconductor companies have their chip design houses in India.

Some estimates predict the Indian semiconductor design market will reach US$ 55 bn by 2026. Also, the sector will attract at least half a million employees.

Even as India gets less dependent on China for chip manufacturing, the chip designers are already tying up with companies in South Korea, Taiwan, and Vietnam.

Strong domain expertise of Indian tech companies and a ready pool of research talent in chip design are in heavy demand.

Globally, companies are trying to gradually move away from their China dependence.

A handful of Indian chip designers are already playing a key role in helping with the shift.

HCL Tech, with its dominant role in semiconductor chip designing, particularly deserves a mention.

The company has set up management teams in Taiwan, South Korea, and Vietnam in recent months seeing the growth potential of this business.

In recent days, Taiwan's Foxconn Technology Group has formed a joint venture (JV) with HCL group to set up a semiconductor outsourced assembly and testing (OSAT) unit.

As per reports, Foxconn will hold 40% equity with an investment of US$ 37.2 million. The company aims to build the semiconductor ecosystem in India and foster supply chain resilience for the domestic industry. Foxconn will deploy its BOL (build-operate-localize) model for the Indian players of the ecosystem. Goes without saying that this ecosystem will support Foxconn smartphone manufacturing facilities in India.

Foxconn's commitment to India's semiconductor ecosystem does not just bring in funds and technology but also demand and supply chain for the ancillary products. The tie-up, therefore, opens up a plethora of opportunities for HCL Tech.

Think Nvidia, which has seen stock price go up almost 5x since 2022.

While India is bound to see several players leading the transformation in semiconductor ecosystem over next few decades, some early movers will have the advantage.

Hope you like this video. Thanks for watching.