Are You Ready to Profit from India's Semiconductor Boom

India is on a path to become a semiconductor powerhouse.

Earlier this month, Prime Minister Modi said India must aim for semiconductor self-sufficiency. The government is very serious about this.

The value of the global semiconductor industry is over US$ 500 bn. The government has 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 manufacturing plants (fabs).

And it has backed this mission with a lot of money.

The government has created a US$ 10 bn (Rs 760 bn) production linked incentive (PLI) scheme. It will support full silicon wafer fabs, display fabs, and allied fabs for sensors etc. The PLI scheme aims to attract private investment of up to Rs 1.7 lakh crore in India.

This scheme is a big boost to the nascent domestic semiconductor industry. The government has also welcomed global firms to set up fabs in India.

In this article, we will look at this exciting new growth opportunity.

A National Priority

The recent supply chain disruptions have made semiconductor self-sufficiency a national priority.

First, it was the covid lockdowns. Now it's the Russia-Ukraine war. The semiconductor shortages affected many industries all over the world.

In India, auto firms are still facing supply constraints.

We must ensure this never happens again. India must become a big player in this sector by the end of the decade.

There have been many recent developments on this front.

Let's look at all the progress so far...

Big Players are Lining up

Earlier attempts by India failed because the government didn't back private firms.

But things are different this time. Many firms have shown interest. And there has been genuine progress.

The media has reported the firms have submitted proposals worth 1.53 lakh crore.

That's a massive number. And the companies in question are serious players.

Vedanta-Foxconn

Vedanta and Foxconn have teamed up, in a 60:40 JV, for a proposed chip fab in the 28 nm category.

Vedanta has also proposed setting up a display fab on its own.

Vedanta's core business is mining. But it has ventured into the semiconductor space before.

None of these attempts took off. Vedanta claims it had never shelved these plans and is ready for another go.

It wants to start operations at its display fab by 2024. It also believes its JV with Foxconn can start operations in the chip fab by 2025.

Foxconn has vast experience in electronics manufacturing. But it does not have any experience in silicon wafer fabs.

The JV will need another technology partner. But there is no doubt about the seriousness of the two companies involved.

ISMC NextOrbit Ventures

Abu Dhabi-based NextOrbit Ventures has tied up with Israel's Tower Semiconductor. Their JV is for a chip fab.

Tower has been recently acquired by Intel. It has experience in fab technologies. It had tried to enter India around a decade ago. It was in partnership with JP group at that time. That attempt failed.

ISMC stated it has completed its initial due diligence. Also, it's ready to get started as soon as it receives approval.

IGSS Ventures

IGSS Ventures is a Singapore-based holding company. It has interests in the technology sector.

The company was set up in 2013. In less than a decade, it has acquired experience in silicon foundries across many types of wafers, chips, ICs and more.

It has the technological expertise to be a tier-1 supplier to many industries.

Elest

This Bengaluru-based startup was founded in October 2020. It's a maker of electrical equipment. It has proposed a display fab valued at US$ 6.7 bn.

The company's promoters are the promoters of Rajesh Exports, India's largest gold exporter. The promoters also have interests in EV and battery manufacturing.

The company has no fab expertise. It will need a technology partner if it must make a serious attempt.

Apart from these, many smaller firms have submitted packaging and design proposals.

How India Will Benefit

building a semiconductor ecosystem needs big investments and critical infrastructure to support it. The plants need a continuous supply of electricity and water.

Even a single manufacturing plant can use anything between two and nine gallons of water per day.

It also needs manpower. The PLI scheme could create 35,000 jobs. This apart from 100,000 indirect jobs. It could also bring in investments of Rs 17,000 bn.

India stands to benefit as it has adequate resources, water, and manpower.

Also, in September 2021, India made a deal with Taiwan. This deal allows Taiwan to transfer technology for a chip plant worth an estimated US$7.5 bn in India. These chips would power everything from 5G devices to electric cars.

Meanwhile, India will be financing 50% of the chip foundry capex. The facility will enjoy tax breaks and other incentives.

This deal is a win-win for both India and Taiwan.

Co-head of Research at Equitymaster, Tanushree Banerjee, shared some insights on this topic.

Here's an excerpt...

• Currently, India imports almost all semiconductors.
  
  Its demand is estimated to reach around US$100 bn by 2025 from about US$24 bn in 2021.
  
  Previous efforts to get companies to invest in the semiconductor space had failed. The complex manufacturing processes requires heavy investments, apart from need for supply of uninterrupted clean water and electricity.
  
  India is seen as strong player in chip design. But the companies here have failed to get chip foundries into the country.
  
  The investments in India's semiconductor capacity are, expected to grow 4-fold in the next few decades.

Listed Indian Companies in the Semiconductor Sector

These are not recommendations. These are the stocks that should be on your watchlist.

• Tata Elxsi
• Dixon Technologies
• ASM Technologies
• SPEL Semiconductor
• Moschip Technologies
• Ruttonsha International

We also recommend you watch the video below. India's top research analyst, Tanushree Banerjee shares her views on India's top semiconductor stocks.