“Semiconductor Superpower”

India’s Road to Tech Self-Reliance and Market Gains

The global semiconductor industry, a critical pillar of technological advancement, has recently seen significant shifts, offering emerging markets like India a vital opportunity to carve their place. The Taiwan Semiconductor Manufacturing Company (TSMC) serves as a benchmark for the rise of semiconductor giants, and its story is a compelling example of how India can harness the lessons learned to strengthen its position. TSMC’s early limitations, such as a lack of in-house capabilities, did not deter its ambitions, and by the late 1990s, it had transformed into a world-class player. What set TSMC apart was its emphasis on collaboration with international suppliers and its long-term vision of meeting global demand for cutting-edge silicon chips.

For India, this global scenario brings unique prospects. The country’s recent initiatives, like the India Semiconductor Mission (ISM), aim to address the growing demand for integrated circuits (ICs) and chip fabrication.
The ISM is designed to:

• Boost the domestic semiconductor ecosystem by encouraging investments.
• Support research and development (R&D) in the semiconductor field.
• Foster home-grown companies capable of producing semiconductor components across various stages of the value chain.

As global supply chains evolve , India has a strategic opportunity to position itself as a hub for semiconductor production and innovation.

The ongoing geopolitical tensions between the U.S. and China have further accelerated the need for diversified semiconductor sources. With nations like the U.S. “friendshoring” their manufacturing capacities to more politically stable regions, India has emerged as a potential nearshoring destination for companies seeking alternatives to East Asian production hubs. Furthermore, the recent U.S. CHIPS Act 2022 provides an additional incentive for firms to explore manufacturing partnerships beyond traditional players like China and Taiwan.

India’s ambition for self-reliance, however, must be matched with actionable steps.
Access to cutting-edge technology is crucial, including:

• Electronic Design Automation (EDA) tools.
• Graphics Processing Units (GPUs) for advanced chip design.

The government’s Production-Linked Incentives (PLIs) aim to:

• Encourage manufacturers specializing in display technologies .
• Support semiconductor fabrication projects in India.

Significant investments in research facilities are necessary, such as:

• The Indian Institute of Science (IISc) .
• The Centre for Development of Advanced Computing (C-DAC)

These investments are essential for fostering innovation across the semiconductor value chain, from design to final assembly.

For investors, the semiconductor push presents a wealth of opportunities in capital markets. Companies involved in semiconductor production and related technologies are likely to witness substantial growth in the coming years.

• Tata-PSMC
• Keynes Technologies Ltd.
• CG Power

These companies have started their quest in semicon industry with installing fab plants in the country. The Indian government’s focus on reducing import dependencies and fostering domestic production could benefit companies directly involved in the semiconductor supply chain. Investors would do well to monitor developments in this sector, particularly those linked to companies working on display fabs, GPU chips, and System-on-Chip (SoC) technologies, as these are expected to see heightened demand.

The India’s emerging semiconductor ecosystem must also focus on managing project-related risks. As upcoming fab plants transition to advanced nodes, they are expected to encounter challenges related to chip yield.

In conclusion, India’s semiconductor industry is not just a technological ambition—it holds transformative potential for the country’s economic and financial landscape. As India strengthens its semiconductor capabilities, the ripple effects will be felt across various industries, including computing, telecommunications, and consumer electronics. For investors, staying attuned to these developments could unlock new opportunities in India’s evolving financial markets.

Some important terms to understand

1. Integrated Circuits (IC): Integrated Circuit (IC), is a small piece of silicon that contains electronic circuits.
2. EDA Tools: A category of hardware, software, and services that help design, test, and manufacture electronic systems. EDA is also known as electronic computer-aided design (ECAD).
3. GPUs: Chips that handle graphics in games and speed up tasks like video processing and AI.

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Actually in one of the concall Mr. Samant mentioned that he needed to pay for warrants that’s how he sold the shares and he wasn’t having a house also , so used the money to buy one.
However I found 2 of his family members also had shares and they have either reduced the position or sold it all out.

Reliance Industries’ Q2 FY25 Performance

Date: October 14, 2024

Key Financials:

• Revenue: ₹2,35,481 crore (up by 0.2% YoY)
• Net Profit: ₹19,323 crore (down by 2.8% YoY)

Reliance Industries’ second-quarter results for FY25 showcased modest revenue growth, but certain sectors of the business continue to present value opportunities despite the overall slowdown.

1. Oil to Chemicals (O2C) Business

• Revenue: ₹1,55,580 crore (up 5.1% YoY)
• EBITDA: ₹12,413 crore (down 23.7% YoY)

The oil to chemicals segment remains a core revenue driver for RIL, contributing significantly to the topline. While margins took a hit due to a sharp decline in transportation fuel cracks and downstream chemical deltas, this could present a value pick for long-term investors considering potential recovery in global demand.

• Opportunities for Value: Increased volumes and domestic placements suggest potential resilience and recovery when global market conditions improve.

2. Digital Services (Jio Platforms)

• Revenue: ₹31,709 crore (up 18% YoY)
• Net Profit: ₹6,536 crore (up 23.4% YoY)

The digital services sector, through Jio Platforms, continues its strong growth trajectory. Jio’s significant subscriber base and the rollout of new services such as Jio AirFiber and AI-Cloud underline the robust potential for further revenue growth.

• Opportunities for Value: The digital services business is rapidly expanding, driven by tariff hikes, subscriber growth in 5G networks, and new offerings like AI-Cloud. As a high-margin segment, it provides an attractive opportunity for long-term investors.

3. Retail Segment

• Revenue: ₹66,502 crore (down 3.5% YoY)
• EBITDA: ₹5,675 crore (up 1% YoY)

Although revenue from the retail business dipped slightly, the EBITDA growth and improvement in margins indicate effective cost management and operational streamlining. The company’s expanding store network and partnerships (e.g., Delta Galil) offer value potential in the fashion and lifestyle categories.

• Opportunities for Value: With 464 new stores and a growing customer base, Reliance Retail is well-positioned for recovery in consumer demand, especially as the macroeconomic environment stabilizes.

4. New Energy Initiatives

Reliance’s new energy giga-factories are on track to commence production of solar PV modules by the end of the year. This venture could be a future game-changer for the company, contributing to long-term sustainability and diversification away from oil dependence.

• Opportunities for Value: The solar PV module production is part of Reliance’s broader strategy to pivot towards cleaner energy, which may unlock substantial long-term value for investors seeking exposure to renewable energy.

5. Oil & Gas Segment

• Revenue: ₹6,222 crore (down 6% YoY)
• EBITDA: ₹5,290 crore (up 11% YoY)

Despite lower price realization, the Oil & Gas segment saw a strong EBITDA growth, mainly due to increased production from its KG D6 and CBM fields.

• Opportunities for Value: The ongoing increase in production and a favorable ceiling price for KG D6 gas offer solid growth prospects for this segment.

Conclusion

Reliance Industries presents multiple value opportunities across its diverse business verticals. Investors could consider Digital Services for high growth potential, Retail for recovery prospects, New Energy for long-term sustainability, and Oil to Chemicals for cyclical recovery. As Reliance navigates the evolving business landscape, these segments provide a balanced mix of immediate and long-term value drivers.

This article aims to guide investors on where they may find value within Reliance’s diversified portfolio, based on its Q2 FY25 performance.