Tata to produce chip in India

India's Tata Group will begin producing semiconductors in the country within a few years, a move that the chairman of the group's main company said will make the South Asian country a key part of global chip supply chains.

In an interview with Nikkei Asia in Tokyo on Thursday, Tata Sons Chairman Natarajan Chandrasekaran revealed that the conglomerate plans to launch new businesses in emerging fields such as electric vehicles.

"We have created Tata Electronics, under which we are going to set up semiconductor assembly testing business," Chandrasekaran said, referring to an electronic components manufacturer that the group founded in 2020.

"We will have discussions with multiple players," the chairman added, raising the possibility of partnerships with existing chip manufacturers. It is believed to be highly difficult for an inexperienced company to launch a chip making business on its own.

It is thought that semiconductor manufacturers and foundries in the US, Japan, Taiwan and South Korea are potential partners in the project.

Chandrasekaran also said, “Tata will look into the possibility of eventually launching an upstream chip fabrication platform." The upstream semiconductor manufacturing process plant called wafer fabrication plant, or fab, is more challenging both technologically and financially compared with downstream process of assembly and testing. His comments reflect the group's aspiration to enter the market if it is technologically and financially feasible.

Tata's move into chip making will break new ground for India, which has virtually no semiconductor industry, other than software-based design, although demand for semiconductor-intensive products such as smartphones and EVs is growing rapidly.

There is also growing momentum to diversify chip supply chains, which are at present concentrated in East and Southeast Asia, following the global chip shortage and US-China tensions. The ongoing US-China decoupling in chip-related technology is also leading major chipmakers to seek more diversified supply-chain locations, which may well open an opportunity for India to emerge as a frontier location. Tata seems to have decided that this is an opportune time to enter the market.

Chandrasekaran explained that his group has been promoting its future ready strategy, in which existing group companies, from steel to arms, adapt to new challenges, such as digitization and climate change, while also launching new businesses.

As part of that effort, the chairman revealed that the group as a whole plans to invest US$90 billion over the next five years. In addition to semiconductors, the chairman said the company is in the process of starting up new businesses such as the manufacture of EVs and EV batteries, production of renewable energy and development of super apps that allow users to buy goods and services from groceries to financial products.

He also said the group wants to unify the management of Air India, the national flagship airline that it has bought back from the government, and Vistara and AirAsia India, which are also in the group. However, he did not say whether this meant combining their brands, simply stating that it was an issue "up for discussion going forward."