Which Tata Group Company Will Manufacture Semiconductors?

The Union Cabinet chaired by Prime Minister Narendra Modi, recently approved the setting up of three semiconductor units under the 'Development of Semiconductors and Display Manufacturing Ecosystems in India'.

The three semiconductor units will be established at Dholera in Gujarat, Morigaon in Assam and Sanand in Gujarat at an estimated cost of Rs 1.2 trillion (tn).

The approval of these units by the Union Cabinet, is a watershed in the history of the Indian semiconductor industry.

Amid these transformative changes, the Tata Group has emerged as a key player as it takes the lead in manufacturing two of the three semiconductor units.

Its entry now in the semiconductor sector heralds India into the Fourth Industrial Revolution, for it will become the first Indian company to manufacture semiconductors which will power digital systems.

Read on to find out which companies are leading the revolution...

#1 Tata Electronics

Tata Electronics is a green field venture of the Tata Group. The company has expertise in manufacturing precision components.

Tata Electronics is a wholly owned subsidiary of Tata Sons that will set up new manufacturing facilities to manufacture customised products for its customers. The company has already taken the first step towards the same.

The government's recent approval of Tata Group for a semiconductor chip fabrication unit in Gujarat is a milestone for the Tata Group and India.

Tata Electronics Private Limited will set up a semiconductor fab in partnership with Powerchip Semiconductor Manufacturing Corp (PSMC), Taiwan. The plant will attract Rs 910 billion (bn) investment.

The plant will have a capacity to produce 3 bn chips every year, which will cater to industries like high-performance computing, electric vehicles, defence and consumer electronics, among other things.

PSMC is a major entity in the chip manufacturing space and ranks among the top ten semiconductor companies in terms of global revenues.

Tata's fabrication unit marks the entry of India into a sector with high industrial as well as strategic importance. Chips are used in all things electronic from debit cards to mobile phones, washing machines to aircraft, and missiles to space rockets.

This fab will have a manufacturing capacity of up to 50,000 wafers per month and will include next-generation factory automation capabilities deploying data analytics and machine learning to achieve industry-best factory efficiency.

Going forward, with a US$ 10 billion investment by 2027, Tata Electronics intends to significantly ramp up its precision manufacturing capabilities. This involves expanding their production capacity and diversifying their product portfolio to include complex electronic components.

The company plans to double the size of its existing iPhone casing unit in Hosur, Tamil Nadu.

#2 Tata Semiconductor Assembly and Test

Tata Semiconductor Assembly and Test Private Limited (TSAT), was incorporated in 2022 as a subsidiary of Tata Electronics Private Limited (TEPL).

TSAT's primary objective is to set up and operate semiconductor assembly and test facilities in India. These facilities play a crucial role in the semiconductor value chain by preparing and testing the chips fabricated elsewhere (by foundries) before they reach end-users and Original Equipment Manufacturers (OEMs).

Under the Union Cabinet approval, Tata Semiconductor Assembly and Test Pvt Ltd (TSAT) will set up a semiconductor unit in Morigaon, Assam, at an investment of Rs 270 bn.

According to the government press release, TSAT is developing indigenous advanced semiconductor packaging technologies, including flip chip and ISIP (integrated system in package).

The plant will manufacture 48 million chips per day for use in Automotive, electric vehicles, consumer electronics, telecom, mobile phones, etc.

Assam finds itself constrained to contracts and direct employment within the public sector, grappling with a notable deficit in skills-a critical concern for the much-anticipated semiconductor project.

This is Assam's largest-ever private investment and a game changer for the economy of the entire North East.

Despite the formidable reputation of the Tata Group, the project faced a prolonged period of uncertainty, with the approval for the Production-Linked Incentive (PLI) hanging in limbo for at least six months, if not longer.

The Ministry of Electronics and Information Technology (MEITY) exercised extreme caution, bordering on scepticism, regarding Assam's capabilities. This caution was well-founded, as they sought to avert any potential derailment of India's semiconductor aspirations.

This project is expected to be completed by mid-2025.

Going forward, the company plans to partner with other companies to enhance its capabilities and expertise.

Conclusion

The approvals are a major fillip to India's semiconductor ambitions. As geopolitical tensions shape the global narrative, the Indian government has identified electronics manufacturing as a key economic growth driver, with chip manufacturing at the heart of these plans.

In tumultuous times, when global value chains are more prone to collapse, the government wants to ensure a steady supply of the components needed for future technologies - from artificial intelligence to electric vehicles and defence capabilities to space exploration, further making space for the company's growth.

With the mega Productivity-Linked Incentives (PLI) for chip manufacturing offered by the government, India is trying to build its highly capital-intensive chip industry.

Manufacturing is strategically important for India because dependence on other countries, especially China or Taiwan, which is under the threat of forcible Chinese possession of chips, may jeopardise India's security. This China Plus One strategy will further aid the companies to grow.

Although the Tata Group companies have always remained at the forefront of innovation and the India growth story, it does not mean Tata stocks aren't vulnerable to macroeconomic conditions.

You should treat them like any other company when considering them from an investment perspective.

Remember, a fundamentally strong company has the potential to give good returns in the long run. Hence, it is better to carry out proper due diligence before investing in any stocks, including Tata Group companies.

As you're interested in Tata group stocks, check out the new section in our Stock Screener, where you can view the fundamentals of companies within a business group in one screen, including the Top Tata group stocks.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...