Top Semiconductor Companies in India: Factors affecting them

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top semiconductor companies in India

Semiconductor Companies in India: Introduction

Imagine a life without electronic devices in today’s world. Nerve-breaking right? The peculiar part is, that we may be surrounded by a number of these devices but the power generating source of them, called semiconductors, is not available in plenty. Though it is worth mentioning that the electronic industry still owes a majority of its development to these semiconductors. 

Nevertheless, it would be aghast to not acknowledge the recent shortage of semiconductors in the year 2021. The event crippled the supply chain of semiconductors around the world and led to its huge demand. While the Indian semiconductor industry is still said to be at a nascent stage. This high capital-intensive industry shall require a few more years down the line to establish a significant position in the country. 

It is to note that India may be late to the idea of semiconductors, but it has therefore an upper edge to learn from the mistakes of the other countries. And it certainly established a pathway for a highly prolific market for the long-term investors in the country. 

Owing to this, let us understand why a semiconductor stock is a must in your portfolio in 2023. 

Summary in brief

  • Growth drivers of the Semiconductor Industry
  • Why invest in Semiconductor stocks in India
  • What is the relevance of the PLI scheme for the investors?
  • Best Semiconductor company stocks in India
  • Factors to consider before investing in Semiconductor companies in India
  • FAQs

What Drives the Semiconductor Industry?

The information economy relies on Semiconductor chips both as the “brains'' and the infrastructure. The growth industries today work on processors, memory chips, and integrated circuits. These components are highly important as they give life to the cloud computing revolution, artificial intelligence, and the software industry.

Also as recent trends have witnessed, especially with the growing adoption of 5G telecommunications, this shall likely boost the value of chip content of a high-end smartphone to around $275. Overall, the industry is expected to grow by 2.5 to three times the rate of GDP. It is also safe to claim that as per the records the industry shall reach a $ 1-trillion market in 2030.  While if we closely analyze,  the following points can be categorized as long-term drivers for the growth of the semiconductors industry:

  • Rising penetration of electronics in the household
  • The rising share of electronics in the auto sector- automated devices depending on chips
  • Increased network connectivity and IoT
  • Rise of localized production to reduce electronic imports
  • Rise of the internet economy leading to smartphone penetration

Why Invest in Semiconductor Stocks in India?

Semiconductor chip manufacturing companies in India are currently in huge demand. The inexorable growth of the sector cannot be ignored. Sure, the valuations in the industry are not cheap, but as recent times are concerned, the run-up in interest rates has hit the industry high time and is likely to bring down the expense of investing in such companies. And while the Indian stock market is reaping a low at the current point, when else can be the best strategic time to invest in such a high-growth stock of the top semiconductor companies listed in India?

What is the relevance of the PLI Scheme for investors?

As there is almost no existence of semiconductor manufacturing companies in India. This leads to a huge import value of around $24 billion. The figure is estimated to reach around $100 billion shortly. The forex outflows are certainly alarming and thus the government took a step to encourage the semiconductor and display manufacturing industry in the country by implementing a Rs 76,000-crore production-linked incentive plan (PLI)

The objective of the initiative is to plant around 20 semiconductor manufacturing, design, components, and display fabrication units in India. The same is likely to be completed over the coming 6 years. To enhance production various incentives have also been lined up for companies engaged in silicon semiconductor fabs, display fabs, semiconductor packaging, and design. It is also expected to create around 1.35 lakh jobs with the help of this scheme in the coming 4 years.

It is no surprise that India is a hub for semiconductor research and design but it lacks behind in the production of the chips locally. 

For the investors looking forward to some viable information, it would be interesting to know that companies like TSMC and United Microelectronics Corporation have contemplated starting their projects soon. Recent reports implied a partnership between FoxconnVedanta in the field to set up a sophisticated chip and glass manufacturing ecosystem. Adding to the advantage of investors, The Tata Group is also to invest up to $300 million to set up a semiconductor assembly plant. When such top-notch names get associated with the industry, the same is likely to reap some leverage. Thus investors must keep a close eye on the stock of these companies and be ready to enhance their portfolios,  provided they need to apply due diligence before investing in such stocks.

Best Semiconductor Companies Stocks in India

By now we have understood the fact that in this growing economy, these semiconductor companies may be struggling to create a space but are likely to bring an Agame to the investment opportunities for the long-term retail investors. 

Let us look at some of the best potential investments out of the semiconductor companies listed in India

CompanyMarket CapLatest Price (in Rs)
Tata ElxsiRs. 40,458 CrRs. 6,511
Dixon TechnologiesRs. 16,669Rs. 2,798.7
Moschip TechnologiesRs. 992.08Rs. 59.65
ASM TechnologiesRs. 444.24Rs. 403/85
SPEL Semiconductor LimitedRs. 186.08Rs. 40.35
Ruttonsha InternationalRs. 224.7 CrRs. 323
Vedanta LimitedRs. 1.09 Lakh CrRs. 295

(Data as of 24th Feb 2023)

Disclaimer: The securities quoted are exemplary and not recommendatory. Past performance is not indicative of future returns

Factors to Consider Before Investing in Semiconductor Companies in India

Investing in such high-end stock can be a tricky business and without considering the important factors before investing would be diving in without a life jacket when you don’t even know how to swim. Therefore an investor can consider the following factors before making a decision:

  • Revenue growth: Generally, revenue growth is considered to be an important parameter while contemplating an investment decision, and revenue growth matter even more for semiconductor stocks. The best investments are in companies that gradually increase their sales over time. 
  • Profit Margins: It is a no-brainer that one must invest in a company that has above profit margins. Sales must translate to profits. Companies with high-profit margins also have a better ability to reinvest in research and enhance their operations.
  • Returns on Invested capital: A company’s return on invested capital (ROIC) indicates its ability to generate profit raised via equity/debt. A high ROIC indicates that a company's stock is likely to be a good option to put your money in.
  • Strong Financials: A company's financials such as its balance sheet, Annual returns, Statement on equity, etc, are the best way to analyze the current performance of a company and gauge an idea of how it is likely to perform in the future. 
  • High Penetration: A high market penetration and potential growth definitely make the semiconductor industry a current hot investment. However, an investor must take care of his risk appetite and must accordingly invest keeping intact the best possible strategy and acquiring the background knowledge of such stocks.

Important things to remember:

1. Do Not Blindly Follow Hot Tips

No matter how credible the source is, never follow a stock marketing tip blindly without conducting thorough research personally. Always select the stocks after doing proper research and analysis on the performance as well as the companies. While some tips can work out to give you huge benefits, the wrong ones can push you down under the risk pretty quickly. 

2. Eliminate Loser Stocks from Portfolio 

There is absolutely no guarantee that a stock will rise after a great fall. Know that it is extremely important to be practical about what is possible and what's impossible in the stock market. So, upon realizing that a stock is performing poorly in your portfolio, accept your mistake and sell it immediately to prevent further losses. 

3. Don't Exceed Your Investment Budget Abruptly 

While it's true that long-term investments are way better than other forms of investment, you shouldn't exceed your investment budget in a haste. Instead, decide on a fixed amount and invest it across various good stocks. Rather than investing in only one stock, divide your budget evenly across multiple good-performing stocks and shares. 

Disclaimer: The securities quoted are exemplary and not recommendatory. Past performance is not indicative of future returns

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