India is poised to transform its semiconductor landscape, driven by government initiatives and a burgeoning domestic market. Recently, industry expert Mr. Ajit Manocha, President and CEO of SEMI, highlighted the immense potential of the Indian semiconductor sector during an expert session focused on capitalizing on this opportunity.

With over four decades of experience in the industry, including a tenure on U.S. President Obama’s committee, Manocha outlined a robust vision for India to become a semiconductor powerhouse.

The Indian semiconductor market is projected to grow at a remarkable 19.6% CAGR, reaching INR 80.3 billion by FY28. This growth is underpinned by the global semiconductor market, which is expected to hit USD 1 trillion by 2030.

The demand is fueled by three significant waves: the Internet of Things (IoT), artificial intelligence (AI), and the impending transition to 6G and quantum technologies.

India’s semiconductor journey is already underway, with initiatives like the India Semiconductor Mission (ISM) encouraging foreign investment and domestic startups.

The government’s ISM 1.0, launched with a financial outlay of INR 760 billion, has sparked interest from global players, and the upcoming ISM 2.0 aims to expand these incentives further.In September 2024, the government announced it would provide 50% financial support to companies establishing semiconductor facilities, leading to investments exceeding INR 1.5 trillion.Several key projects are already in motion. Micron Technology is setting up an OSAT (Outsourced Semiconductor Assembly and Test) facility in Sanand, Gujarat, focusing on DRAM and NAND products.

Tata Electronics, in collaboration with Taiwan’s PSMC, is establishing India’s first advanced semiconductor fab in Dholera, with a production capacity of 50,000 wafers per month. Additionally, Tata is launching an indigenous assembly and testing facility in Assam, aimed at producing 48 million chips daily.

Despite these advancements, India still relies heavily on imports for raw materials like silicon carbide and gallium arsenide.

To address this, local chemical companies are looking to expand their capabilities, as the purity required for semiconductor production is exceptionally high. By strengthening its supply chain for essential materials, India can bolster its semiconductor ecosystem.

Manocha emphasized that while India has a rich design capacity—housing 20% of global design houses—it must now attract investment in manufacturing capabilities. Currently, Indian fabs are approximately 30% costlier than those in Taiwan and Southeast Asia due to smaller scale operations.

However, as the industry grows and targets a broader market, cost efficiencies are expected to improve significantly.

The human resource aspect is also promising. With about 1 million new positions anticipated in the semiconductor sector by 2030, India’s annual production of 800,000 engineers positions the country to address global talent shortages effectively.

In summary, India stands on the brink of a semiconductor revolution. With strategic government policies, significant investments, and a growing domestic market, the country is set to play a crucial role in the global semiconductor industry.

As initiatives unfold, India’s ambition to be a major player in this sector appears increasingly attainable, paving the way for technological advancements and economic growth.

Kaynes Technology: Buy| Target Rs 6400| LTP Rs 5300| Upside 20%

Kaynes has formed three partnerships with Brightgrid Technologies, Lightspeed Photonics, & VLSI Society of India to strengthen its footprint in semiconductors. Diversification of product portfolio into high-growth seg., along with strategic partnerships, positions Kaynes well within India’s decade-long growth story in the EMS sector.

We expect PAT CAGR of 67% over FY24-FY27 driven by a healthy order book growth trajectory and a better margin profile.

ABB: Buy| Target Rs 9500| LTP Rs 7525| Upside 26%

Demand for FMIG is higher during an uptrend and ABB is capitalizing on this demand from its motion and electrification segment.

This demand can continue for another 5-10 years and industries are comfortable paying higher pricing. We thus believe that margins in these two segments will remain higher over the next few years.

(The author is Head – Research, Wealth Management, Motilal Oswal Financial Services Ltd)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)