Owing to rapid technological advancements and the ever-growing demand for technological devices, the Indian semiconductor industry is attracting increasing attention both globally and domestically. While India has been depending on imports to cater to their semiconductor demand, there has been development and growth within the Indian market as well.
In this blog, let us take a look at the country’s semiconductor market, everything you need to know about semiconductor stocks in India, along with the associated benefits and risks.
What Are Semiconductor Stocks?
Semiconductors are small chips that help manage the flow of current in various electronic devices. In order to cater to the growing demand for electronic devices, these companies produce a wide range of semiconductor products such as microprocessors, memory chips, and integrated circuits. They are used in smartphones, computers, automotive electronics, and several other gadgets.
Semiconductor stocks, therefore, refer to the shares in companies that deal with the design, develop, and manufacture of semiconductors.
The Growth of Semiconductor Industry in India
Recognising the importance of the semiconductor industry, the Ministry of Electronics and Information Technology (MeitY) has taken several initiatives in the past few years. They are aimed to foster domestic production of semiconductors and reducing dependence on foreign markets.
- India Semiconductor Mission (ISM): Launched in 2022, the ISM aims to promote semiconductor manufacturing in India. This initiative includes incentives for both manufacturing and design aspects of semiconductor production, encouraging investment and innovation in the sector.
- Design Linked Incentive (DLI) Scheme: The DLI scheme supports semiconductor startups by providing incentives linked to the design aspect of semiconductor development. It aims to nurture at least 20 domestic companies and potentially generate a turnover of more than INR 1500 crores in 5 years.
- Production Linked Incentive (PLI) Scheme: Under the PLI scheme, companies are incentivised to establish semiconductor manufacturing facilities in India, contributing to the growth of the domestic semiconductor industry.
- Make in India Initiative: Launched in 2014, the campaign seeks to promote domestic manufacturing across various sectors, including electronics. Through this initiative, the government aims to potentially reduce its reliance on imports and boost the nation’s economic growth.
It is clear that the government approach goes beyond manufacturing and aims to support design, research, and development within the Indian semiconductor industry.
Benefits of Investing in Semiconductor Stocks
Let us take a look at some of the benefits of investing in semiconductor stocks:
- Growth Potential: The growing demand for electronic devices presents significant growth opportunities for investors as the industry continues to evolve.
- Innovation: Semiconductor companies are constantly innovating to keep up with the demands of the market. Investing in these companies can aid technological progress.
- Potential Global Reach: Many semiconductor companies have a global presence which allows investors to benefit from international growth opportunities and diversify their portfolios.
- Diverse Market Demand: Semiconductors are integral to various industries, including consumer electronics, healthcare, automotive, and telecommunications. This can provide investors exposure to a broader range of market segments.
Risks of Investing in Semiconductor Stocks
Investors should carefully assess these risks and conduct thorough research before investing in semiconductor stocks.
- Competition: The semiconductor market is highly competitive, with numerous companies competing for market share. Intense competition can lead to price wars, margin pressure, and challenges in maintaining profitability. This can have a potential negative impact on stock prices.
- Technological Changes: The semiconductor industry is characterised by rapid technological advancements. This requires companies to continually invest in research and development to stay in the competition. Careful research is required as a competitive advantage is essential for maximising potential returns.
- Regulatory Risks: Semiconductor companies are subject to various regulations, including export controls, environmental standards, and cybersecurity requirements. Any changes in regulations can affect the industry, which in turn can affect investment returns.
- Cyclical Nature: The semiconductor industry is cyclical, i.e., it experiences periods of boom and bust. Economic downturns, fluctuations in demand for electronic devices, and changes in technology cycles can lead to volatility in semiconductor stock prices.
List of Top Semiconductor Stocks in India 2024
| Company | Market cap (₹ in crores) | Share price (in ₹) |
| Bharat Electronics Limited | 1,41,371 | 189.25 |
| CG Power and Industrial Solutions Limited | 69,025 | 449.35 |
| Hitachi Energy India Limited | 25,644 | 5,673.3 |
| V Guard Industries Limited | 12,726 | 292.9 |
| Havells India Limited | 86,206 | 1,305.6 |
| Polycab India Ltd | 65,104 | 4,361.7 |
| ABB India Ltd | 1,00,676 | 4,731.25 |
| Honeywell Automation India Ltd | 33,161 | 38,657.5 |
Disclaimer: Please note that share prices and market capital values are subject to change and may vary based on market conditions.
Factors to Consider Before Investing in Semiconductor Stocks in India
Financial Performance: It is important to assess a particular company’s financial health before investing in it. Metrics like revenue growth, profitability, and debt levels should be considered to judge the suitability of the investment.
Market Trends: It is important to stay informed about market trends, global demand, and industry shifts affecting semiconductor stocks in India. This will help investors make informed investment decisions.
Supply Chain: Any disruptions in the semiconductor supply chain can affect sales and share prices. It is advised to avoid stocks linked to supply chain issues like delayed product launches or reduced revenues.
Regulatory Changes: Monitor regulatory changes affecting semiconductor stocks domestically and internationally to anticipate potential impacts on the industry. Stay informed about new policies and regulations that could influence market dynamics and investment outcomes.
Diversification: By diversifying investments across various sub-sectors within the semiconductor industry, investors can mitigate risks arising from market volatility. This strategy helps balance exposure to different segments and provides a measure of protection against sector-specific challenges.
Conclusion
Thanks to the increasing demand for electronic devices and government initiatives for promoting domestic production, the semiconductor industry in India is experiencing significant growth. Investing in semiconductor stocks can present opportunities for long-term growth, potential global reach, and portfolio diversification. However, like any other stocks, semiconductor stocks are also subject to inherent risks. They include intense competition, potential regulatory shifts, and the cyclical nature of the industry. It is vital to conduct thorough research and make provisions for risk management before making any investment decision.
Disclaimer: The information contained in this article is solely for informational purposes and should not be construed as a stock recommendation or advice to buy or sell company shares. Stock market investing carries some risk. Therefore, before making an investment in shares, derivatives, or any other type of financial instrument traded on the exchanges, it is advisable to conduct thorough research or speak with an investment advisor.
FAQs
What are semiconductor stocks?
Semiconductor stocks refer to the shares in companies that are involved in the design, development, and manufacturing of semiconductors. Semiconductors are small chips that help manage the flow of electricity in devices such as smartphones.
What are the benefits of investing in semiconductor stocks?
Due to the growing demand for electronic devices and government initiatives for domestic production, semiconductor stocks have the potential for long-term growth. Other benefits include exposure to diverse market segments and a chance to contribute to India’s technological advancements.
What are the risks associated with investing in semiconductor stocks?
Investors should be aware of certain factors that can lead to price volatility, such as intense competition within the industry, potential shifts in regulations, and the cyclical nature of the semiconductor industry.
How can I stay updated on semiconductor stocks in India?
Financial news websites, reports on investment research, industry publications, and company websites of the stocks you are interested in are some good resources to stay informed about the Indian semiconductor market.
