If oil drove growth in the last century, semiconductors look set to take up the role in the present one. The global demand for the wafer-thin metal chips that run everything from smartphones to cars appears insatiable. India’s semiconductor industry has been in the limelight in recent years. The evolution of electronic vehicles, the rollout of 5G, and the increase in defense manufacturing have all boosted demand for semiconductors in India. Semiconductor is a fast-growing industry and investing your money in semiconductor stocks can be a good investment bet.
However, it is important to understand what semiconductors are and the dynamics of the industry before choosing good semiconductor stocks.
What is a semiconductor?
As small hinges swing big doors, semiconductor chips power modern-day electronics. A semiconductor is a small chip sometimes as small as 2 nanometers. This tiny chip forms the backbone of electronics such as laptops, phones, microwaves, and even smart cars. These chips ensure that gadgets perform the tasks they are designed to perform.
An oversimplified explanation of semiconductor function would be that a semiconductor chip is a gadget’s brain.
Semiconductor industry in India at a glance
While India currently relies on semiconductor imports to meet demand, the domestic semiconductor industry is expanding, with many Indian and multinational companies opening semiconductor production facilities in the country.
The Indian semiconductor market was valued at US$ 26.3 billion in 2022, which is estimated to expand at a CAGR of 26.3% to US$ 271.9 billion by 2032.
The global semiconductor demand exploded during the pandemic due to supply shocks and exponential demand growth. While top chip producers such as the US, Taiwan, China, and South Korea have devised ways to ensure a steady supply of semiconductors, India too has upped its game. India set up the India Semiconductor Mission (ISM) in 2021, offering generous subsidies and a conducive business environment to attract major industrial players to the semiconductor industry. Truly, the semiconductor industry in India is poised to grow in the years to come.
One way to partake in the semiconductor growth story is by investing in semiconductor stocks in India. We have listed the top semiconductor companies in India for you to pick semiconductor stocks for your portfolio.
Top semiconductor stocks in India in 2024 by market cap
India has established players entering the semiconductor space and new players engaging in the semiconductor business. Here are the top 10 semiconductor stocks in India in 2024.
| Sr no | Company | Market Cap (in Rs. Cr) as of 29-8-24 |
| 1 | HCL Technologies Limited | 4,73,779 |
| 2 | Bharat Electronics Limited (BEL) | 2,16,479 |
| 3 | Vedanta Limited | 1,80,797 |
| 4 | CG Power & Industrial Solutions Ltd | 1,07,390 |
| 5 | Tata Elxsi Limited | 49,697 |
| 6 | Moschip Technologies Ltd | 4,910.00 |
| 7 | MIC Electronics Ltd | 1,952.19 |
| 8 | ASM Technologies | 1,717.46 |
| 9 | RIR Power Electronics Ltd | 1,530.35 |
| 10 | Solex Energy Ltd | 1,202.40 |
The semiconductor space in India includes conglomerates, midcap, and smallcap firms. The top 10 semiconductor stocks listed above are a mix of companies by market cap and firms that operate in varying segments like chip design and manufacturing. Here’s an overview of the top five semiconductor companies in India.
Overview of the best semiconductor stocks in India
1. HCL Technologies
HCL Tech, one of India’s largest IT service providers, is also a semiconductor company with expertise in semiconductor equipment solutions development. This helps them understand and meet the demands of the constantly evolving semiconductor market. HCL has a range of semiconductor-related services, positioning the firm as a promising bet in the Indian semiconductor space.
2. Bharat Electronics Ltd. (BEL)
BEL is a government of India-owned semiconductor and aerospace and defense electronics company engaged in the design and development of Radars and Fire Control Systems, Missile Systems, Communication and C4I systems, Electronic Warfare & Avionics, Naval Systems & Antisubmarine Warfare Systems, Electro Optics, Tank Electronics & Gun Upgrades, etc.
3. Vedanta Ltd.
Vedanta Ltd, a diversified natural resource group engaged in exploring, extracting, and processing minerals and oil & gas is now diversifying into semiconductor manufacturing with a plant in Dholera, Gujarat. Vedanta Semiconductors Private Limited (VSPL) is a wholly owned subsidiary of Vedanta Limited that is working on building India’s first semiconductor and integrated glass and display facility set to commence commercial operations in 2027.
4. CG Power & Industrial Solutions Ltd
CG Power & Industrial Solutions is a global enterprise providing end-to-end solutions to utilities, industries, and consumers for the management and application of efficient and sustainable electrical energy.
The company in partnership with Renesas Electronics Corporation, Japan, and Stars
Microelectronics, Thailand recently announced its foray into the semiconductor industry. The joint venture will set up a semiconductor unit in Sanand, Gujarat with an investment of Rs. 7,600 crore.
5. Tata Elxsi Ltd.
Tata Electronics in partnership with Powerchip Semiconductor Manufacturing Corporation (PSMC) of Taiwan plans to set up a mega semiconductor fabrication facility (Fab) in Dholera, Gujarat.
Tata Elxsi, a leading provider of design and technology services worldwide, serving industries including Automotive, Broadcast, Communications, Healthcare, and Transportation is a likely beneficiary of Tata Group’s foray into the semiconductor space.
Factors to consider before investing in semiconductor stocks in India
The nascent Indian semiconductor industry is expected to grow exponentially in the coming years. This is how you can evaluate semiconductor stocks before making investments.
Financial performance
Evaluating a company’s financial position is highly recommended before investing in it. This might be truer for semiconductor companies as it is a budding industry in India. The companies might have higher debt or an unclear balance sheet that doesn’t portray their true financial position. Evaluating the company on metrics such as revenue growth, profitability, and debt levels can help you understand the firm’s financial soundness.
Stay informed about market trends
Stay up-to-date on market trends and developments that can impact the semiconductor demand globally or domestically. Keep an eye out for shifts in policy, geopolitical situations, and new emerging technologies to make informed investment decisions.
Diversification strategy
Spread your investments across different sub-sectors within the semiconductor industry to mitigate risks associated with market volatility. Choose stocks operating in sub-sectors such as semiconductor design and engineering, memory chip manufacturers, and chip fabricators. This will help you spread your risk across companies and subsectors.
Monitor the regulatory environment
Be aware of regulatory changes that may impact semiconductor stocks in India, both domestically and internationally. Policy changes can have significant implications for the industry, impacting investment outcomes.
Supply chain
Any disruptions in the semiconductor supply chain can drive up its sales and share prices. Monitor all the stocks carefully and avoid the ones associated with delayed product launches, reduced revenues, and higher prices due to supply chain issues.
Should you invest in semiconductor stocks?
The bull run in semiconductor stocks led by US chip maker Nvidia is the talk of the town. This has made investing in semiconductor stocks a popular theme in India as investors look for the Indian answer to the US company.
While the semiconductor sector has delivered good returns in the past year, it is important to understand the risks associated with the semiconductor sector in India.
- It is a highly volatile sector that witnesses price movements influenced by changes in demand, geopolitical tensions, and market sentiment.
- The semiconductor industry is cyclical. This means the stock prices will have periods of gain, followed by bouts of fall. This can lend a cyclic element to your portfolio.
- Following investment themes blindly can be dangerous for your portfolio in the long run as the narratives can change, leading your portfolio to lose value.
Diversify by spreading the risk over semiconductor stocks operating in various subsectors of the industry and include firms with varying market caps. Additionally, a portfolio will require further diversification with stocks outside the semiconductor industry to add stability and balance risk.
Conclusion
The semiconductor industry in India is on a growth run. Investing money in semiconductor stocks can give substantial returns to shareholders as strong growth in the smart gadgets and mechanization segments in India would boost demand for chips.
