The Tata Group has revealed its plans to capture a large portion of India's future high-tech manufacturing market in less than a year. It became the first Indian firm to join Apple's supply chain as an iPhone assembler in November of last year when it acquired the India manufacturing facility of Taiwan's Wistron. In March, four months later, two semiconductor plants proposed by the Tata Group were approved for construction. One of them was a chip assembly, testing, marking, and packaging facility in Morigaon, Assam, costing Rs 27,000 crore. The other was a $11 billion semiconductor fab facility in Dholera, Gujarat, which would be the first of its kind in the country.
According to ET's reporting based on sources, Pegatron, another Taiwanese contract maker in India for Apple, is reportedly in advanced talks to sell a majority stake in its iPhone production operation near Chennai to Tata group.
A national champion in two industries bolstered by substantial government subsidies under the Production Linked Incentive (PLI) plan, Tata has risen swiftly in the high-tech manufacturing arena. The government's Make-in-India program, which features a lion emblem, has been advocating the development of India as a manufacturing powerhouse; these new endeavors will contribute to this goal.
A national champion's meteoric rise
Ashwini Vaishnaw, the minister for electronics, IT and railways, expressed her delight at the emergence of Indian leaders in mobile phone manufacturing when asked about the possible acquisition of Pegatron's India unit by Tata. An increasing number of young people are discovering new job prospects as the sector continues to expand.
Indian minister of state for electronics and information technology Rajeev Chandrasekhar stated, "I think Tata's entry definitely signals that the Indian EMS (electronic manufacturing service) has (now) a giant Indian company which does manufacturing for global brands (in the present and is maturing now") following Tata's acquisition of Wistron last year.
Companies like Siemens in Germany and British Steel in the UK popularized the idea of national champions, while chaebols in South Korea, like Hyundai, Samsung, and LG, took it a step further. Governments played a key role in industrialization by providing large incentives to develop conglomerates, which benefited the nation as a whole by increasing exports, creating jobs, and solidifying the country's position as a global leader in technology. Such ardent supporters of the nation tend to cluster in areas of national importance, like defense. In an effort to transform the nation into a global manufacturing powerhouse, the Indian government is implementing PLI projects totaling $24 billion across 14 different industries, including electronics, toys, and chips. In order to get into the smartphone and chip manufacturing industries, Tatas and many other large corporations have taken use of the PLI scheme.
Although PLI is also designed for numerous smaller businesses across other industries, the production of semiconductors and smartphones necessitates well-established, large-scale firms with substantial financial resources. Even during colonial times, the Tata conglomerate was a national champion. For nearly a century, Tata has been the only Indian conglomerate to keep pace with the country's industrial revolution. The company has been an industry trailblazer in steel, aviation, automobiles, and software, among others. Tata will now lead India into its fourth industrial age by producing chips, following in the footsteps of its forefathers who ushered in the first industrial age by producing steel domestically.
According to Tata Electronics Chairman Banmali Agrawala, India's manufacturing sector has been experiencing a downturn, so the country should focus more on electronics manufacturing services, which include supplying original equipment manufacturers with components and assemblies as well as their design, manufacturing, and testing. There is a lot of space for expansion because our proportion of the global industrial trade is so small. The electronics industry generates $5 trillion in annual revenue. India should be pursuing digitalization since it is only going to expand at the global speed, Agrawala said, adding that the country's domestic consumption won't be adequate to support economic growth.
Tech company Tata's move
The Tata Group is planning massive expansion in the technology industry. According to recent reports from ET, citing reliable sources, the company plans to invest more than $120 billion in several new business sectors and group priorities in the next years. These areas include semiconductors, defense, electric vehicles, and Air India, among others. By 2027, initial estimates had projected a capital deployment of almost $90 billion. This is the biggest domestic investment commitment ever made by the corporation, and it will mostly go toward capital-intensive endeavors like semiconductors and Air India. The company is investing $5 billion into a battery storage factory in Gujarat with a capacity of 20 gigawatts, as well as a new electric vehicle battery plant in Bridgwater, England, to facilitate its shift to electric vehicles. Both projects are expected to be completed within the next few months.
When it comes to nation-building and expanding, the Tata Group is taking daring, forward-thinking wagers. The CEO of a prominent mutual fund recently told ET that the Tata Group is making bold steps in semiconductors and batteries, similar to what Jamsetji Tata did in steel. "The Tata Group's DNA has always been about taking bold risks, and with N Chandrasekaran at the helm, they have the right leader." It is no small task to set up a semiconductor factory in the country from the ground up. It will take a lot of work and investment because India doesn't have a semiconductor ecosystem, he warned.
The previous director of Tata Sons—the holding company of the Tata corporation—Ishaat Hussain has emphasized the size of India as an attractive opportunity for the corporation to pursue new avenues of growth. "The emergence of a digital economy presents Tata Group with opportunities to strategically position itself for growth," he said in an interview. Whether it's Air India, semiconductors, or batteries, the group can find a happy medium with its current and future growth industries with a solid cash flow. The group will never face a shortage of demand as long as the economy and per capita income continue to increase. With its extensive network in India, Tata is well-positioned to take advantage of future prospects.