India's Deep Tech Ecosystem: 4 Stocks to Watch Out in the Photonics Sector

The deep tech landscape is on the cusp of a profound shift, driven by the power of photonics.

India, with its rapidly expanding economy and focus on technological advancement, is strategically poised to become a key player in this revolution.

The Indian photonics market is estimated to reach US$ 70 billion (bn) by 2026.

Let's first understand the fundamental concepts in detail before moving on to the stock involved in this space...

What is Photonics?

Imagine a world where light not only illuminates our surroundings but powers communication, heals diseases, and builds the next generation of technology.

This is the world of photonics - the science and technology of generating, controlling, and detecting photons, the fundamental particles of light.

Unlike traditional electronics, which deal with the flow of electrons, photonics uses light particles. These photons can travel incredibly fast and carry vast amounts of information.

How Does Photonics Work?

Creating Light: Lasers of all kinds, LEDs, and specialised light sources are the heart of photonics systems.

Guiding Light: Optical fibres act like highways for light, while lenses and mirrors bend it to our will.

Seeing Light: Cameras, sensors, and advanced detectors in medical equipment turn light into images and insights.

Why is Photonics Important?

Photonics is a transformative technology offering distinct advantages over traditional electronics:

Unmatched Speed: Photons, the carriers of light, travel at the fastest known speed in the universe. This translates directly to unparalleled speed in communications and data transfer, enabling the backbone of today's connected world.

Extreme Precision: Lasers, a core element of photonics, provide highly focused light beams crucial for applications requiring utmost accuracy. This enables surgeons to make precise incisions, manufacturers to cut and shape materials with microscopic detail, and scientists to measure with extraordinary resolution.

Superior Energy Efficiency: Photonic devices often consume significantly less energy compared to electronic counterparts. This offers reduced operational costs in data centres and enables smaller devices with extended battery life.

Non-Invasive Interaction: Photons can interact with materials without causing damage. This fuels advances in medical imaging (like MRI), allowing visualisation within the body, and non-destructive quality control in manufacturing.

Potential for Miniaturization: Photonic components can be remarkably small, enabling the development of powerful sensors in tiny packages and photonic integrated circuits (like microchips that use light). This paves the way for groundbreaking advancements in computing and communication.

The Catalyst for Disruption: Photonics doesn't simply optimise existing technologies; it unlocks entirely new possibilities. This is evident in fields like quantum technologies (ultra-secure communication, next-generation computing) and light-based therapies.

Photonics offers a superior way to transmit information, sense our surroundings, heal, and build the next generation of products and technologies.

Why the Indian Photonics Industry is Primed for Growth...

Here's a breakdown of the key drivers:

Soaring Demand and Market Growth:

• Rapidly Growing Domestic Market: India's expanding telecommunications sector, healthcare needs, and focus on manufacturing automation are driving significant demand for photonic components and solutions.
• Untapped Potential: Compared to mature electronics, photonics is a nascent industry in India. This translates to immense room for growth and a chance to capture a significant share of the global market.

Government Support and Policy Push

• Policy Tailwinds: Initiatives like "Make in India" and "Digital India" encourage domestic manufacturing and create a supportive environment for the photonics industry.
  
• Investment in R&D: Government programs and research institutes foster innovation and development of homegrown photonic technologies.

Emerging Applications and Strategic Importance

• Focus on Defense and Security: India's growing focus on self-reliance in defence necessitates domestic development of photonics-based systems for communication, surveillance, and target acquisition.
  
• Medical Advancements: With an ageing population and increasing healthcare needs, photonics plays a crucial role in affordable diagnostics, imaging, and light-based therapies.
  
• Smart Manufacturing Revolution: The push for Industry 4.0 requires advanced photonic solutions for laser processing, quality control, and automation.

Additionally...

• Cost Advantage: India has the potential to develop cost-effective photonics solutions, making them attractive alternatives in the global market.

What are the Challenges?

Component and Materials Ecosystem: India currently imports many specialised high-end components and raw materials. This creates supply chain dependencies and limits cost competitiveness. Developing a domestic supply chain network for critical materials and components is crucial for long-term success.

Limited Manufacturing Infrastructure: Compared to the electronics sector, the manufacturing base specifically for photonic components is less developed in India. Investments in specialised foundries and fabrication facilities are needed to meet the domestic demand cost-effectively and expand for export markets.

R&D and Commercialization: While research in photonics is increasing in India, there's room for improvement in efficiently translating lab-based innovations into commercially viable products.

Funding and Incubation: Like any high-tech sector, photonics requires significant investments in R&D, product development, and scaling. While there are government programs, access to venture capital and a supportive ecosystem for early-stage photonics companies needs to be more robust.

Global Competition: The photonics industry is dominated by established players in the US, Europe, and East Asia.

Top 4 Stocks to Watch Out

#1 Bharat Electronics (BEL)

Bharat Electronics is a state-owned frontrunner in defence electronics, with a growing emphasis on electro-optics and photonics. Its portfolio of night vision devices, optronic systems, and laser-based equipment demonstrates a strong commitment to harnessing the power of light for defence applications.

As India prioritises self-reliance in defence technology, BEL's in-house photonics R&D positions it strategically for growth.

Investors should understand that BEL's trajectory is closely linked to Indian defence spending and priorities.

Furthermore, advancements driven by defence requirements often find future applications in civilian markets, presenting potential for technology spillovers in areas like surveillance or industrial automation.

#2 Dixon Technologies

Dixon Technologies is a major player in the Indian electronics contract manufacturing space.

The company's core business remains broader electronics manufacturing, with photonics representing a growing segment of their operations.

Its expertise in LED lighting, security systems, and appliances positions them strategically at the intersection of photonics and electronic manufacturing.

Dixon's strength lies in large-scale manufacturing and a focus on cost-effectiveness, which has the potential to drive wider adoption of photonics-based products within the Indian market.

#3 Sterlite Technologies

Sterlite Technologies (STL) is a global leader in optical communications products and solutions.

The company specialises in manufacturing optical fibres and fibre optic cables, the crucial backbone of photonics-based communication networks.

It invests heavily in research and innovation, developing cutting-edge optical fibre technologies to enhance transmission speeds, capacity, and efficiency.

Beyond just components, STL provides end-to-end solutions, including network design and deployment services, integrating photonics systems for large-scale telecom and data networking projects.

The company is actively exploring emerging applications of photonics in fields like 5G networking, data centres, and FTTx (Fibre-to-the-x), broadening the scope of their photonics expertise.

It has a significant global presence with manufacturing, research, and services spanning India, China, Europe, and Brazil.

The company aligns with the Indian government's "Digital India" push, aiming to connect vast segments of the population with high-speed internet.

#4 Birla Cable

Birla Cable (formerly Birla Ericsson Optical) is a well-established player in India's telecommunications cable industry, offering a wide range of copper and fibre optic cables.

Its photonics connection primarily lies in their expertise in fibre optic cables, which are crucial for high-speed telecommunications, data centre networking, and potential niche applications within photonics.

Birla Cable's long history in the telecom sector provides a deep understanding of the evolving need for photonics-based solutions.

The company possesses a broader portfolio beyond fibre optics, and its overall growth in the photonics space is closely tied to the expansion of telecom and other photonics-reliant sectors within the Indian market.

In Conclusion: The Time for Indian Photonics is Now

The Indian photonics industry is at an inflection point, brimming with potential for long-term growth. Fueled by a burgeoning domestic market, supportive government policies, and accelerating adoption across diverse sectors - the industry is poised to witness significant expansion.

A surge in demand for photonics components and solutions driven by factors like the rollout of 5G networks, increasing data centre traffic, and the rise of smart infrastructure is anticipated.

Additionally, advancements in areas like biophotonics and LiDAR (Light Detection and Ranging) sensors hold immense promise for future applications.

Challenges remain, including dependence on imported materials, limited domestic manufacturing infrastructure for specialised components, and a skills gap in the photonics workforce.

However, government initiatives to promote domestic production and targeted skill development programs are expected to address these hurdles over time.

Companies that can capitalise on these trends and navigate the existing challenges are well-positioned for significant gains in the years to come.

For more, check out this list of some more deeptech stocks that can be on your watchlist.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here.