Kaynes Tech rallies 8% on govt approval for semiconductor unit in Gujarat

The proposed unit, with a production capacity of six million chips per day, will be setup with an investment of Rs 3,300 crore.

Shares of Kaynes Technologies rallied 8 per cent to Rs 5,052.25 on the BSE in Tuesday’s intra-day trade after the Union Cabinet approved the proposal of Kaynes Semicon Pvt Ltd, a wholly owned subsidiary of the company, to set up a semiconductor unit in Sanand, Gujarat.

The proposed unit will be set up with an investment of Rs 3,300 crore. The fabrication unit will have the capacity to produce six million chips per day.

The chips produced in this unit will cater to a wide variety of applications which include segments such as industrial, automotive, electric vehicles, consumer electronics, telecom and mobile phones, among others.

Kaynes's assembly, testing, marking and packaging (ATMP) project is the fifth semiconductor unit to be approved by the central government under the Rs 76,000-crore India Semiconductor Mission (ISM).

The approval for Kaynes's fab unit comes after the government has already approved Micron's, Tata's, and CG Power's facilities in Gujarat, and another project by the Tata group in Assam.

At 09:59 am; Kaynes Technologies was trading 5.5 per cent higher at Rs 4,910, compared to the 0.11 per cent decline in the BSE Sensex.

The stock had hit a record high of Rs 5,385 on August 21, 2024. Currently, Kaynes Technologies shares are trading 761 per cent higher, over their issue price of Rs 587 per share. The company made its stock market debut on November 22, 2022.

Kaynes Technologies is primarily engaged in the design and manufacturing of advanced electronic modules and solutions catering to a wide range of industries.

In a wider context, India’s electronics system design and manufacturing (ESDM) industry was valued at $29.41 billion as of FY2023-24, and it is expected to reach $71.89 billion by FY2026-27.

Several Original Equipment Manufacturers (OEMs) have traditionally engaged in the development, design and manufacturing of electronic products internally. Currently, OEMs with in-house capabilities account for around 75 per cent of India’s total domestic electronics production market. However, reliance on ESDM partners has been increasing gradually.

The ESDM industry presents a significant opportunity, driven by the localisation of the electronics supply chain in India. This localisation is fuelled by high domestic volumes, increased consumption and enhanced outsourcing, leading domestic manufacturers to procure components locally and strengthening the domestic ecosystem.

Currently, tier II companies are leveraging ESDM services to offset high costs while focussing on product localisation, innovative design and research and development, Kaynes Technologies said in its FY24 annual report.

Meanwhile, the Indian government has also been introducing transformative changes, with policies such as Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), Product Linked Incentive (PLI), and National Policy on Electronics (NPE) 2019.

These initiatives have enhanced preferential conditions, augmented infrastructure, and increased raw material accessibility for the industry players. These initiatives have also positioned the country to compete against China’s current manufacturing cost advantage.

The megatrend of outsourcing manufacturing to ESDM companies is inevitable as OEMs are focussing on their core competencies. Moreover, with the surge in consumption across automobiles, consumer durables, industrial machinery and telecommunications segments, the demand for electronic components and systems is poised for substantial growth, which presents a compelling opportunity for the ESDM industry, the company added.