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Thursday, September 23, 2021

Explained: Why is Tata Group getting into semiconductor manufacturing?

For the Tata Group, while a foray into chip making would mean entering a lucrative business that can find customers not only in India but across the world, it would also be significant for captive use with Tata Motors, Tata Power, etc.

Written by Pranav Mukul , Edited by Explained Desk | New Delhi |
Updated: August 20, 2021 10:15:41 am
There is currently a global shortage of chips and semiconductors (File photo)

Mumbai-based conglomerate Tata Group, which has already forayed into manufacturing of hi-tech electronics, is now planning to get into semiconductor manufacturing. The move comes at a time when the Covid-19 pandemic caused and later exacerbated a global shortage of chips and semiconductors.

Why is Tata Group foraying into semiconductor manufacturing?

Tata Sons Chairman N Chandrasekaran said recently: “At the group, we have already set up a business to seize the promise of high-tech manufacturing of electronics, precision manufacturing, assembly and testing, and semiconductors in the medium term.”

The conglomerate has also recently acquired a stake in Tejas Networks, which is involved with manufacturing of telecom equipment. In addition to these, the Tata Group has already laid down its plans for a digital foray through a super-app and has acquired stakes in consumer internet firms like BigBasket, 1mg.com and CureFit.

Why is the timing significant?

Currently, the world is experiencing a shortage of chips and semiconductors that have become essential not only for new-age technological products like smartphones and computers, but also for traditional sectors like automobiles.

Several carmakers in the world have delayed deliveries of their vehicles and even pushed the launch of new vehicles because of the chip shortage. Tata Motors’ UK-based unit Jaguar-Land Rover has also done so.

For the Tata Group, while a foray into chip making would mean entering a lucrative business that can find customers not only in India but across the world, it would also be significant for captive use with Tata Motors, Tata Power, etc.

What is behind the global chip shortage?

The chips, or semiconductors, which are the brain-centre of any electronic technology has found itself to become a rare commodity in the post-Covid era, with several large factories in places like South Korea and Taiwan being shut down. This has created pent-up demand that these foundries were unable to satisfy after opening up.

On the one hand, the pandemic caused a surge in demand for electronic devices such as smartphones, laptop and computers, etc.

The manufacturing and logistical bottlenecks meant that the situation was only exacerbated. This shortage that began last year, is expected to go on till 2022, and to prevent a future situation like this, a number of companies are planning to reduce their dependance on the only few large factories that supply to the whole world.

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