What is Tata’s plan in the semiconductor business?
Roaming in thin air for almost around 1 year, Tata Sons chairman Natarajan Chandrasekaran finally materialized the news of Tata Group entering the semiconductor business on 8th December 2022. The project will be Tata Group under Tata Electronics Private Limited, a greenfield venture with a specialization in manufacturing precision components that will set up an Outsourced Semiconductor Assembly and Test (OSAT) unit. Also known as Assembly, Testing, Marking, and Packaging (ATMP) unit, the ATMP process takes up 6% of the total Semiconductor industry value, where China leads the globe. These units are responsible for packaging silicon devices that are made by foundries and testing those devices before launching them to the market. It’s one of the last steps that play an important role after wafer fabrication and wafer probe.
Why was this move important now?
No industrial individual can forget the Global Chip Shortage of 2020. An aftereffect of the pandemic and due to a combination of different events as well as the disbalance between the demand and supply chain of the world in the Semiconductor market. With only 6 countries responsible for 96% Semiconductor value chain, the demand is spectacularly high, this is where the Semicon India program ascends.
PLI scheme aims to put India on semi-conductor map
With a total outlay of 76,000 Crores by the Prime Minister Narendra Modi-led Indian government introduced a production Linked Incentive (PLI) scheme for the development of semiconductors and display manufacturing ecosystem in India. The PLI program includes fiscal support of 30% of the Capital Expenditure to eligible candidates for setting up ATMP/OSAT semiconductor facilities in India. With more than half a dozen companies waiting in the queue, Tata has many long-term plans in this space as well as division. Most global experts have expressed their views that ATMPs are a great way of kick-starting a semiconductor business. Usually, package complexity decides the amount of investment you can put up. Also, the output of ATMP units can be directly consumed by electronic product companies but it’s not the case if it’s a semiconductor fabrication unit. India is yet to begin its journey in the semiconductor market so programs like Semicon will really help us develop units for each part of the process. With China’s increasing capacity as the manufacturing hub for electronic products, India has to cover up a lot of ground to make a position. Semiconductor chipset packaging is different from any other industrial packaging as there are multiple technologies to use and strategies to keep it efficient and fast. Out of many different processes involved in a whole semiconductor manufacturing cycle, ATMP’s mostly industries are set up in China and Taiwan, the home of TSMC. It’ll be a perfect stage for India to start. With India’s good reputation for business values, entering into the semiconductor market domain will be a great economic boost for our electronic sector. After the generous schemes by the Indian government, different companies from all over India have started putting applications in the same domain. The natural resource giant, Vedanta Resources signed a deal with Tiawanese Foxconn. The duo agreed on a pact with Gujarat government to set up a semiconductor factory. The 20 billion USD deal will be done through a separate entity which is Vedanta Resources’ holding company Volcan Investments Ltd on a 60:40 ratio of the joint venture where Foxconn gets 40. The joint venture is will be setting up a semiconductor and a display fabrication unit.This July the 22-year-old Indian industry, Sahastra Semiconductors announced their plan to set up an ATMP unit at Bhiwadi, Rajasthan with an investment of INR 750 crores. Another name from South, Polymatech from Tamil Nadu announced its plans to invest 1 billion USD to expand its chipset manufacturing and packaging facility in the state near Krishnagiri. Started in 2007, Polymatech is India’s first Semiconductor chip manufacturer.
Challenging Times ahead..
With Tata Group’s plan to invest $300 million into a semiconductor manufacturing unit on hold for now, the right decision to put up an ATMP unit will pick up the pace now. As stated by Tata Sons’ chairman Mr. Chandrasekaran, Tata Group is planning to invest 90 billion USD into the semiconductor market in the next 5 years. A market that will soon touch 1 trillion USD in valuation. The high chair has been given to Raja Manickam, CEO of Tata Electronics OSAT India in 2021. Raja has spent 40 years in the electronic industry working for big titles. Without revealing the strategy, it’s expected that the conglomerate will adopt foreign technologies for now and may have to partner with an existing company that’s already in this business. With Tata Group entering this domain, it’ll be of great outcome for the retail behemoth as India’s up and booming in the future EV market as well. Tata’s current trend can be seen as in insight as, during the global chip shortage, the subsidiaries like Jaguar and Land Rover suffered a setback. Taking control of the liabilities sounds like a win-win situation. With India’s potential in the EV market and the importance of semiconductor chips in electronic vehicles, this move will be a game changer for at least a decade. With Tata Group’s reputation in the global market, this is just another venture for the firm to excel in.
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