Dixon Tech & other semiconductor stocks to benefit as the industry is set to grow at 35% CAGR

India’s ambitious semiconductor push is gaining momentum, with $18 billion in investments underway for a chip fab and four ATMP/OSAT projects. The government’s strong focus on expanding the entire ecosystem aims to quadruple electronics production to $500 billion by 2030. With supportive policies, rising demand, cost advantages, and strategic ties with the West, India is well-positioned to replicate its automotive sector success in semiconductors. As the industry grows at a 35 percent CAGR, semiconductor stocks are set to thrive.

Government Push

The Indian government has set out to boost domestic electronics manufacturing, with a goal to quadruple production to $500 billion between FY24 and FY31. Although India possesses strong design talent and assembly activities are growing, value addition remains low at 18-20 percent, which the government aims to increase to around 35 percent by 2030. 

To support this, the government launched an additional $10 billion program in 2021, offering incentives covering about 50 percent of the project cost for chip and display fabs, as well as testing facilities. Some states provide an additional 20 percent incentive, bringing the total benefit to approximately 70 percent.

Here are a few stocks to benefit from these developments:

1. Dixon Technologies (India) Ltd

With a market capitalization of Rs.80,065 crore, the share price of Dixon Technologies (India) Ltd closed at Rs.14,025.40 per share on Friday, rising 1 percent from its previous close. 

Dixon Technologies is making significant advancements in the semiconductor sector, with plans to invest around $3 billion in a new display fabrication facility in Noida. This facility will leverage government incentives under the India Semiconductor Mission (ISM) 2.0, which could cover up to 75% of the project cost. 

The company is actively engaging with a global technology partner to enhance its display manufacturing capabilities, crucial for various electronic devices like smartphones and televisions. By localizing production, Dixon aims to reduce India’s dependence on imports, particularly from China, and establish itself as a key player in the semiconductor space.

Also read: Dixon Tech & other semiconductor stocks to benefit as the industry is set to grow at 35% CAGR

2. CG Power & Industrial Solutions Ltd

With a market capitalization of Rs.95,165 crore, the share price of CG Power & Industrial Solutions Ltd closed at Rs.642.00 per share on Friday, falling 2 percent from its previous close. 

CG Power is advancing its Outsourced Semiconductor Assembly and Test (OSAT) facility, slated to begin production by FY27. The project will unfold in two phases, with a mini factory expected to commence operations by FY26. In a strategic move, CG Power recently acquired the Radio Frequency (RF) components business from Renesas Electronics for $36 million, which will allow the company to enter the semiconductor design market. 

This acquisition aligns with CG Power’s broader strategy to strengthen its semiconductor capabilities and cater to India’s growing demand for electronic components, positioning itself as a significant player in the industry.

3. Kaynes Technology India Ltd

With a market capitalization of Rs.31,095 crore, the share price of Kaynes Technology India Ltd closed at Rs.4,878.50 per share on Friday, rising 5 percent from its previous close. 

Kaynes Technology plans to invest Rs.4,800 crores in new projects over the coming years. Of this, Rs.2,800 crores will be allocated to establish a semiconductor OSAT and compound semiconductor facility in Kongara Kalan, near Hyderabad. Additionally, its wholly-owned subsidiary is setting up a semiconductor manufacturing unit in Sanand, Gujarat, with a projected investment of Rs.3,307 crores, targeted for completion by September 2024.

The company is expanding its semiconductor footprint with a new facility focused on advanced packaging technologies aimed at improving margins. It is targeting Rs.4,000 crores in revenue from its Gujarat semiconductor unit by the fiscal year 2029-30, leveraging its EMS capabilities and strategic partnerships to tap into India’s growing semiconductor market and accelerate growth.

With commercial production expected to start soon, Kaynes is also exploring opportunities in high-density printed circuit boards and other related areas. The company’s initiatives are supported by government policies designed to increase local value addition in electronics manufacturing, reinforcing its commitment to contributing to the growth of India’s semiconductor industry.

Written by – Siddesh S Raskar

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