The semiconductor industry has received a lot of attention lately due to a global shortage and high demand. In an attempt to capitalize on this rapidly growing sector, investors are looking for the best Indian semiconductor stocks. This article will provide an overview of the Indian semiconductor market and a selection of some of the Best Semiconductor Stocks in India in 2024.
Factors to Consider Before Choosing/investing in Semiconductor Stocks in India
Buying such high-end stock can be a challenging process, and investing might result in large losses if you fail to consider all the necessary factors before investing. As such, before choosing to invest in semiconductor stocks, an investor has to consider the following factors:
- Revenue Growth: Revenue growth is a crucial factor to take into account when selecting an investment, particularly for semiconductor stocks. Therefore, businesses that progressively grow their sales over time make the safest investments.
- Profit Margins: It makes sense to invest in a business with profit margins that are higher than normal. The earnings stream needs to come from sales. Large profit margins enable companies to improve operations and reinvest in R&D.
- Return on Invested Capital (ROIC): Return on Invested Capital (ROIC) measures a company’s capacity to make money on its debt or shares. If the ROIC of a company is high, then investing in its shares is a good idea.
- Strong Financials: The best way to analyze and forecast a company’s future performance is to look at its financial statements, including its balance sheet, annual returns, and statement on equity.
- High Market Penetration: The semiconductor business is attractive because of its significant market share and room for expansion. Nonetheless, while keeping the best possible plan in place and obtaining pertinent background information, investors must take their risk tolerance into account and make investment choices that reflect it.
The Semiconductor Industry – An Overview
Semiconductors are crucial parts that are utilized in the production of many different items, including computers, mobile devices, televisions, refrigerators, and automobiles. To suit its needs, India now imports a significant quantity of semiconductors. However, it is anticipated that the Indian semiconductor market will be valued at over $100 billion by 2025, providing enormous opportunities for domestic manufacturers. The Indian government introduced the production-linked incentive (PLI) scheme with an investment of ₹76,000 crore ($10 billion) to boost the industry and encourage semiconductor chip manufacturing in the country.
5 Best Semiconductor Stocks in India
Investors should keep a watch on the following top semiconductor stocks in India:
Vedanta Limited, formerly known as Sterlite Industries, is a multinational mining business that is primarily involved in the oil & gas and metals sectors. Vedanta initially chose to build a display unit at a significant cost, but with this move, it made a second attempt to enter the semiconductor business. Although the company’s debt-to-equity ratio of 2.04 is quite high, it also yields a significant dividend.
ASM Technologies Ltd:
ASM Technologies Ltd. is a holding company with operations in India that provides services to markets in the US, UK, Singapore, Japan, the Middle East, and India. To increase packing production, ASM is now working on building a Vacuum Cassette Unit and a Modular Transfer Chamber (MTC). ASM Technologies has demonstrated positive development, with revenue of ₹192 crore and a net profit of ₹14 crore in FY22.
Moschip Technologies Ltd:
The first fabless semiconductor company in India to go public is called Moschip Semiconductor Technology. Moschip has created and produced a range of connection solutions, shipping more than 10 million chips to customers including Sony, Toshiba, and Hitachi. The company made ₹6 crore in net profit on ₹148 crore in revenue in FY22.
SPEL Semiconductor Ltd:
SPEL Semiconductor Ltd. is the sole semiconductor IC assembly and testing facility in India. SPEL Semiconductor Ltd. was founded in 1984. In addition, it is the first and only semiconductor integrated circuit assembly and testing facility in India.
Technology and design services are provided to a variety of markets by Tata Elxsi Ltd., the product design subsidiary of the Tata Group, including broadcast, transportation, healthcare, and the automobile industry. The company, which leads the world in technology design and services, has partnered with Renesas Electronics Corporation, a pioneer in cutting-edge semiconductor technologies, to open a cutting-edge design center in Bangalore.
The government’s emphasis on promoting domestic manufacturing coupled with the growing demand for semiconductors makes the Indian semiconductor industry a compelling investment prospect. For investors looking to capitalize on this trend, the top semiconductor stocks in India are Vedanta Limited, ASM Technologies Ltd, Moschip Technologies Ltd, SPEL Semiconductor Ltd, and Tata Elxsi Ltd. It is essential to consider each company’s financial situation, development potential, and industry trends before investing.