India is building chip capacity ahead of demand: 360 ONE prefers EMS plays over pure fabs

Reports coming in for today mention that India’s semiconductor propel has moved from policy announcements to physical construction, with 12 approved projects and more than $18 billion already committed. Domestic chip demand is projected to more than double to over $117 billion by 2030. But capacity is being further noted ahead of proven demand and supplier depth, creating clear execution risk. 360 ONE Capital says the safer near-term way to participate is through established electronics manufacturing and component firms rather than pure fabrication bets.

According to 360 ONE, the India Semiconductor Mission has shifted the industry from intent to execution. Twelve projects have been approved under ISM 1.0, representing more than $18 billion of committed investment. These include three fabs across silicon, silicon carbide and gallium nitride, along with nine packaging units.

ISM 2.0 is anticipated to broaden the focus further — covering design, equipment, materials, additional fabs, advanced packaging, R&D and talent. Conference estimates point to more than $13 billion of incentives that could catalyse over $35 billion of additional ecosystem investment.

Global players are already responding. Applied Materials has announced a $5 billion India investment over 10 years, ASML is building customer-backing capability around Tata Electronics’ Dholera fab, and Micron has begun commercial production at Sanand. The demand-capacity mismatch

Domestic semiconductor demand is forecast to climb from around $56 billion in 2025 to more than $117 billion by 2030 — a roughly 16% CAGR. Demand is broad-based across logic, memory, analog, power, sensors and optoelectronics, fuelled by AI, cloud, automobiles, industrial automation, telecom, defence and renewables.

The critical offering, 360 ONE notes, is no longer whether factories can be built. It is whether they can achieve competitive yields, qualify with global customers and operate at scale. Capacity is being further noted ahead of proven demand and a deep domestic supplier base. In the words of the report, a completed fab is infrastructure; a yielding fab is capability.

Near-term value capture is as a result likely to be stronger among ecosystem enablers — cleanrooms, utilities, equipment backing, gases, chemicals, testing and engineering — than in capital-intensive wafer fabrication itself. The theme should be evaluated over a 10–15 year horizon rather than as an immediate earnings cycle.

Preferred route: EMS and components

360 ONE prefers firms that can participate in the initial build-out without taking direct fabrication risk. At this stage, established EMS and component suppliers such as Avalon Technologies and Syrma SGS Technology are noted as the more practical way to play the theme.

Avalon Technologies: Target price boosted to Rs 2,998 (from Rs 2,097) on a sum-of-the-parts basis. The stock is trading at elevated multiples, but the brokerage maintains a Buy rating, citing customer-programme transfers and the eventual ramp-up of its JV.

Syrma SGS Technology: Earnings estimates boosted by roughly 5 to 15% for FY28-29. Target price lifted to Rs 2,000 (from Rs 1,709). Buy rating retained.

Other listed names that could benefit over the longer term include Kaynes Technology, CG Power, L&T, ASM Technologies and MosChip Technologies. These offer varying degrees of direct manufacturing, design or engineering exposure, but with elevated execution and utilisation risk. The hierarchy of exposure

360 ONE lays out a clear preference order:

Preferred near-term enablers: Avalon and Syrma (existing EMS and component capabilities; semiconductor upside is incremental).

Direct manufacturing exposure: Kaynes, CG Power, L&T (elevated strategic upside but greater capex, qualification and yield risk).

Engineering and design: ASM Technologies, MosChip (more asset-light exposure).