Top 5 Semiconductor Stocks in India for 2023
You may have heard about the shortage of semiconductors and their importance in various industries. But what exactly is a semiconductor? In simple terms, a semiconductor is a device used to control the flow of electricity in different appliances. It is present in many electronic products like computers, smartphones, gaming devices, medical equipment, and electric vehicles. Understanding the technical workings of these chips can be challenging and complex.
It’s worth noting that semiconductors are utilized in various applications. For instance, temperature sensors in air conditioners and rice cookers are made with these chips. They are also crucial in the production of CPUs for personal computers. Beyond consumer electronics, semiconductors play a vital role in the functioning of ATMs, trains, and other societal infrastructures.
In the case of electric vehicles (EVs), it’s important to highlight that a typical EV requires numerous semiconductor chips.
The semiconductor chip shortage emerged as a global issue affecting various industries. Several factors contributed to this, including the global pandemic, ongoing trade wars, and other factors. Semiconductor chips have grown in importance over the years, and according to Deloitte, the global semiconductor chip industry is projected to reach approximately USD 600 billion by 2022. Moreover, the chip shortage experienced in the past two years has led to a revenue loss exceeding USD 500 billion.
The significance of semiconductor chips is anticipated to grow in diverse industries due to their increasing usage in various products. While the supply shortage is expected to persist, there are plans to establish additional semiconductor manufacturing facilities worldwide.
The emergence of artificial intelligence, the Internet of Things, and related fields has fuelled the demand for semiconductors globally. The key components of a semiconductor include memory, micro components, OSD (Optical Sensing Devices), logic, and analogue. The graph provided by PWC illustrates the market growth by component type.
Top 5 Semiconductor Stocks in India (2023)
Top 5 Semiconductor Stocks in India are the following.
|Sl no||Company Name|
|1||Tata Elxsi Ltd.|
|2||ASM Technologies Ltd.|
|3||Dixon Technologies Ltd.|
|4||SPEL Semiconductor Ltd.|
|5||Moschip Technologies Ltd.|
#1. Tata Elxsi
Tata Elxsi was founded in 1989 and they offer design and technology services to various industries, including automotive, broadcast, communications, healthcare, and others. The company specializes in semiconductor services, providing AI tools and frameworks, SDK and reference design solutions, functional safety, multimedia reference frameworks, and FPGA design and development.
In terms of strengths, Tata Elxsi is nearly debt-free and has a strong track record of a 29.95% return on equity (ROE). The company also maintains a healthy operating margin of 28.67%.
#2. ASM Technologies
ASM Technologies is a multinational corporation founded in 1992. The company provides services such as product lifecycle management, the Internet of Things (IoT), engineering services, and others.
ASM has a significant amount of experience in serving well-known semiconductor manufacturing companies. In terms of strengths, the company has a price-to-earnings (PE) ratio of 43.91, indicating its market valuation. It also gives a good dividend yield of 5.27%. Moreover, ASM has achieved an average profit growth rate of 51.52%.
#3. Dixon Technologies
The company was established in 1993 and operates as an electronics manufacturing service provider. It specializes in the production of consumer durables, including LED TVs, mobile phones, washing machines, CCTV security units, and more.
In terms of strengths and weaknesses, the company has demonstrated a commendable profit growth of 38.66% over the past three years, accompanied by revenue growth of 36.93%. The company has maintained a return on equity (ROE) of 22.60% and a return on capital employed (ROCE) of 30.83% during the same period. However, it should be noted that the company is trading at a considerably high price-to-earnings (PE) ratio of 159.95.
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#4. SPEL Semiconductor Ltd.
SPEL Semiconductor was founded in 1988 and is the first and only semiconductor IC assembly and test facility in India.
In terms of strengths and weaknesses, the company demonstrates an efficient cash conversion cycle of 85.20 days and has a high promoter holding of 59.17%. It also benefits from a strong degree of operating leverage. However, the company has experienced a poor profit growth of -0.65% and the revenue growth has been unsatisfactory.
#5. Moschip Technologies Ltd.
The company was established in 1999 as an Indian semiconductor company, providing support to vendors and OEM suppliers for a diverse product range.
In terms of strengths, the company has maintained a consistent profit growth compound annual growth rate (CAGR) of 22.65% over the past three years. It has also achieved notable income growth during this period.
However, on the downside, the company has exhibited a poor return on equity (ROE) of -23.12% and a poor return on capital employed (ROCE) of -8.11% over the last three years.
In this article, we have discussed the top 5 semiconductor stocks in India. The growing demand for semiconductors across various industries has witnessed a significant increase in recent years. Furthermore, the expansion of internet access and the widespread adoption of smart devices are additional factors driving the growth of the semiconductor market. This gives a good opportunity for investors interested in the sector.