What’s the story
Shares of Indian semiconductor companies experienced a significant surge on Monday.
This followed the announcement of a landmark agreement between India and the US to establish India’s first-ever national security semiconductor fabrication plant.
The facility is part of a transformative collaboration with the US, aimed at producing chips for military hardware use in both nations, as well as for critical telecommunication networks and electronics.
Plant to manufacture advanced semiconductors
The upcoming plant is designed to manufacture advanced semiconductors such as infrared, gallium nitride, and silicon carbide.
This initiative is backed by the India Semiconductor Mission and a strategic technology partnership involving Bharat Semi, 3rdiTech, and the US Space Force.
The project was unveiled following discussions between Prime Minister Narendra Modi and US President Joe Biden in Wilmington on Saturday.
Leaders hail semiconductor partnership as ‘watershed arrangement’
Both Modi and Biden lauded the India-US semiconductor fabrication partnership as a “watershed arrangement,” according to a joint statement released post their discussions.
The plant, named ‘Shakti,’ will be among the world’s first multi-material fabs for national security.
It also marks a significant milestone for Bharat Semi fab within the Quad nations (US, India, Japan, Australia), focusing on advanced sensing, communications, and high voltage power electronics.
‘Shakti’ to address commercial sector needs
The ‘Shakti’ plant will cater to the growing needs of commercial sectors such as railways, telecom infrastructure, data centers, and green energy.
These sectors require advanced semiconductors known as ‘compound semiconductors.’
The Quad leaders have also approved a memorandum of cooperation for the Semiconductor Supply Chains Contingency Network, which aims to facilitate collaboration in managing supply chain risks.
Semiconductor stocks see significant rise
The market responded positively to the news with shares of Hind Rectifiers Ltd. rising by 5% in early trade, followed by MosChip Technologies and Bharat Bijlee.
MosChip Technologies’s stock saw an increase of as much as 3.86% during the day before settling at a 1.9% higher value at ₹260 apiece.
Shares of ASM Technologies also rose by up to 2.55% during the day to ₹1,737 apiece on the NSE, trading 0.7% higher at ₹1,705 apiece around the same time.
India’s semiconductor import bill for national security
Currently, India spends approximately $1 billion annually on importing semiconductors for national security.
This technology partnership with the US is seen as a historic moment in the India-US relationship, drawing parallels to the civil nuclear deal.
Following this agreement, India will join an exclusive group of nations with the expertise and capacity to manufacture these types of semiconductors domestically.
