Cabinet to Setup 3 Semiconductor Plants: Top Stock to Grow

Introduction

What if I told you that India is about to make history in the world of technology? That it is ready to challenge the dominance of countries like China, Taiwan, and the US in a crucial sector that powers everything from smartphones to supercomputers? That it is investing a staggering amount of money to build not one, not two, but three state-of-the-art semiconductor plants? You might think I’m exaggerating, but I’m not. This is the reality of India’s semiconductor boom, a game-changing move that could transform the country’s economy, innovation, and global influence. In this blog post, I’ll explain what this deal means, how it came about, and what it could do for India and the world.

India’s Economic Growth Trajectory

India is no stranger to economic growth. In the last decade, it has emerged as one of the fastest-growing and largest economies in the world, thanks to its diverse and dynamic sectors. From public sector undertakings (PSUs) to IT, OMC, and infrastructure, India has shown remarkable resilience and adaptability in the face of challenges and opportunities. The latest proof of this is the impressive GDP growth of 8.4% in Q3, surpassing expectations and signaling a strong recovery from the pandemic-induced slowdown.

Emerging Sectors and Global Technological Shifts

But India is not content with resting on its laurels. It is also looking ahead and preparing for the future. As the world undergoes rapid and radical technological shifts, new sectors are emerging and gaining prominence. These sectors are driven by innovation, disruption, and demand, and they offer immense potential for growth and impact. One of these sectors is the semiconductor sector, which is at the heart of the digital revolution.

Semiconductor Sector Takes Center Stage

Semiconductors are tiny devices that control the flow of electricity in electronic circuits. They are the building blocks of modern technology, enabling the functioning of everything from laptops and smartphones to satellites and missiles. They are also essential for the development of artificial intelligence (AI), which is expected to be the next frontier of human progress. The semiconductor sector is therefore a strategic and lucrative one, with a global market size of over $500 billion. However, it is also a highly competitive and complex one, requiring huge investments, advanced skills, and sophisticated infrastructure. Only a handful of countries, such as China, Taiwan, and the US, have the capability and capacity to produce semiconductors at scale. India, until recently, was not one of them. But that is about to change.

Breaking Down the Semiconductor Deal

In a historic decision, the Union Cabinet of India approved the establishment of three semiconductor plants, or fabs, in the country, with a total investment of 1.26 trillion rupees (about $17 billion). This is the largest and most ambitious initiative ever taken by India in the semiconductor sector, and it aims to make the country self-reliant and competitive in this vital domain. Here are the key details of this landmark deal:

Plant Locations

Two plants will be set up in Gujarat, one of the most industrialized and prosperous states in India. The third plant will be located in Assam, a northeastern state that is often neglected and underdeveloped. This will boost the regional development and integration of Assam and create employment opportunities for the local population.

Collaborations

The plants will be established in collaboration with some of the leading players in the semiconductor industry, both domestic and foreign. Tata Group, India’s largest and most respected conglomerate, will be the main partner, setting up two plants in Gujarat and Assam. The Gujarat plant will be in partnership with Taiwan’s Powerchip Semiconductor Manufacturing Corporation, one of the world’s top chipmakers. The Assam plant will be in collaboration with Test Pvt Ltd, a homegrown company that specializes in semiconductor testing and packaging. The third plant in Gujarat will be set up by C G Power, another Indian company that provides end-to-end solutions for various industries. C G Power will partner with companies from Japan and Thailand, which have expertise in semiconductor design and fabrication.

Investments

The plants will involve massive investments, reflecting the scale and scope of the project. Tata Group will invest 91,000 crore rupees (about $12.3 billion) for its plant in Dholera, Gujarat, which will be the largest and most advanced fab in India. It will also invest 27,000 crore rupees (about $3.6 billion) for its plant in Assam, which will be the first fab in the northeastern region. C G Power will invest 7,600 crore rupees (about $1 billion) for its plant in Gujarat, which will be the smallest but still significant fab in the country.

Production Capacity

The plants will have different production capacities, depending on their size and technology. Tata Group’s plant in Gujarat will have the highest capacity, producing 48 million chips per day. These chips will be of 28 nanometer (nm) and 12 nm sizes, which are the most advanced and in-demand chips in the market. Tata Group’s plant in Assam will have a lower capacity, producing 12 million chips per day. These chips will be of 65 nm and 45 nm sizes, which are still widely used and relevant for various applications. C G Power’s plant in Gujarat will have the lowest capacity, producing 15 million chips per day. These chips will be of 180 nm and 130 nm sizes, which are the simplest and cheapest chips in the market.

Semiconductor Sector Stocks to Watch

The semiconductor deal is not only a boon for India’s economy and technology, but also for its stock market. The announcement of the deal has already boosted the share prices of the companies involved, as well as other related companies. Here are two stocks that you should keep an eye on, as they could benefit from the semiconductor surge:

Tata Elxsi:

Tata Elxsi is a leading provider of design and technology services globally, with a focus on embedded product design. It caters to various industries, such as transportation, media, healthcare, and consumer electronics. It has a strong presence in the semiconductor sector, offering chip design, verification, and validation services. It also has a partnership with Powerchip, the Taiwanese company that will collaborate with Tata Group for the Gujarat plant. Tata Elxsi has shown consistent and impressive growth in its revenue and earnings, despite the high PE and PEG ratios. It is one of the best-performing stocks in the Tata Group portfolio, and it could gain further from the semiconductor deal.

C G Power:

C G Power is an end-to-end solutions provider for various industries, such as power, industrial, railways, and renewables. It has a major revenue share from its industrial systems segment, which includes motors, generators, drives, and automation. It also has a presence in the semiconductor sector, offering chip fabrication, assembly, and testing services. It has a partnership with companies from Japan and Thailand, which will collaborate with C G Power for the Gujarat plant. C G Power has shown mixed and volatile performance in its revenue and earnings, with high valuations and debt levels. It is one of the most risky and speculative stocks in the semiconductor sector, but it could also offer high rewards if the deal succeeds.

Conclusion

This blog post is not meant to be financial advice, but rather an informative and engaging overview of the semiconductor deal and its implications. The deal is a landmark achievement for India, as it shows its vision and ambition to become a leader in the high-tech and AI-oriented market. The deal also has the potential to create a positive impact on the country’s economy, innovation, and global influence, as well as on the companies and stocks involved. As the semiconductor plants take shape and start operations, it will be interesting to see how they perform and compete in the global market. India’s semiconductor saga is just beginning, and it promises to be an exciting and rewarding journey. Stay tuned for more updates as the deal unfolds and reshapes India’s technological future!