Will India become a semiconductor hub? Stocks that will benefit!

adminJune 10, 2024

The semiconductor industry forms the basis of modern electronic products such as smartphones, computers, electric vehicles, and artificial intelligence processing devices. Taiwan is at the forefront of the semiconductor industry, with TSMC (Taiwan Semiconductor Manufacturing Company) as the undisputed number one.

However, in India, interest in the semiconductor market is increasing due to increasing demand for electric vehicles and infrastructure development. The interim budget for 2024-25 has allocated a budget of Rs. It is 690.3 billion won compared to the same period last year. 300 billion.

Taiwan: A Current Semiconductor Hub

Taiwan holds 67% of the global market share in the semiconductor industry, while TSMC alone holds about 53% of the market share. TSMC primarily leads Taiwan’s presence in the semiconductor industry. Our top 10% of customers accounted for more than 90% of our total net revenue last fiscal year. These customers include MediaTek, AMD, Qualcomm, Broadcom, Sony, and Nvidia.

On average, companies spend about $20 billion on research and development. However, the company has decided to invest more than $100 billion over the next three years to expand production capacity and maintain its technological edge. We are budgeting between $28 billion and $38 billion in capital expenditures for the current fiscal year.

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India’s aspirations and challenges

In India, until 2021, the government has launched a PLI scheme for companies called “Revised Scheme for Semiconductor and Display Fabs” with a budget of Rs. 76 trillion dollars. We supported 50% of the project cost and capital expenditure on a pari-paasu basis for establishing the fab. India’s semiconductor industry is expected to grow at a compound annual growth rate (CAGR) of 20.1%, reaching $100.2 billion in 2032 from $34.3 billion in 2023.

As already established, India recognizes the strategic importance of developing domestic semiconductor manufacturing capabilities. Likewise, the national policy on electronics includes specific measures to attract investment and create a favorable environment for semiconductor manufacturing.

Fabless semiconductor manufacturing has increased. The company designs, develops, markets and sells chips, but does not manufacture them itself. Some of the major players in India include Tata Elxsi, Dixon Technologies, ASM Technologies, MosChip, RIR Power Electronics, Vedanta, etc.

A variety of companies characterize the Indian semiconductor industry, each focusing on a specific segment such as automotive, logic, processors, computers, and electronics. These companies are categorized into various groups based on their product offerings and expertise. For example, Mochip Technologies specializes in fabless semiconductor manufacturing, ASM Technologies specializes in design, prototyping and manufacturing, and Vedanta manufactures 28-30nm chips.

Current situation of Indian semiconductor companies

The Indian semiconductor industry has been growing in recent years thanks to government policies. Nevertheless, these companies are still new companies, and existing companies have only recently entered the semiconductor business. Because of this, semiconductor companies still have a highly volatile nature.

The Indian semiconductor industry remains highly dependent on imports, which could be a major constraint on industry growth. India’s imports of electronics, communications and electrical products reached about $89.8 billion in 2023-24, but about 50% of them were imported from China and Hong Kong. These imports are also a result of the semiconductor shortage caused by COVID-19.

Deep-rooted dependence on these two countries could lead India to face serious problems with regard to strategic autonomy and economic security. The Indian government recognizes the need to reduce this dependence and is taking steps to strengthen domestic manufacturing capacity. The “Revised Scheme for Semiconductor and Display Factories” aims to support the establishment of semiconductor manufacturing plants in India and finance 50% of the project cost through a pari-paasu agreement.

To address this issue, governments are encouraging local manufacturers through tax breaks, easier access to capital, and infrastructure development. Cooperation Partnering with international technology companies for technology transfers and joint ventures can also be helpful. HCL Technologies is pursuing a JV with Foxconn (Taiwanese electronics manufacturer) to set up an outsourced semiconductor assembly and test (OSAT) division in India.

Companies like Tata Group, Texas Instruments and others are interested in the government’s bid for overhaul of the semiconductor lab in Mohali. American multinational semiconductor giant AMD has opened its largest global design center, the Technostar Research and Development Campus, in Bangalore as part of a $400 million investment over the next five years.

As part of India’s AI program, the government plans to build powerful GPU clusters. This cluster will support the growth of startups actively pursuing artificial intelligence model innovation. The government will allocate Rs. The scheme will cost ₹1,100 – 1,200 crore. This funding is part of the Design Linked Incentives (DLI) scheme. The investment aims to accelerate AI development and strengthen India’s global AI presence.

$2.75 billion semiconductor project – Micron Technologies Ltd (USA)

Micron Technologies, the world’s 5th largest semiconductor company, is entering India. The Prime Minister himself invited the company to boost semiconductor manufacturing in India. On June 28, 2023, Micron Technologies signed a Memorandum of Understanding (MOU) with the Government of Gujarat, India. It has been agreed to invest $2.74 billion in the 93-acre Sanand GIDC-II industrial park.

The company has invested approximately $825 million, with the remainder to be supported by government subsidies. The project is called the Assembly, Testing, Marking and Packaging (ATMP) facility. Tata Projects has been awarded the contract to build the ATMP facility.

The project is divided into two parts, with Phase 1 already employing more than 200 people and expected to be completed before FY2025. Once completed, it is expected to employ approximately 5,000 people over the next few years. The second phase of the project is scheduled to begin within the next 10 years. The $45 billion smartphone industry stands to benefit from this as many blue chip companies like Apple show interest in growth in India. semiconductor industry.