Explained: Tata Group Is Entering Semiconductor Manufacturing Market Amid Global Chip Shortage

Indian multinational conglomerate Tata Group appears to be on the verge of entering the semiconductor manufacturing market — especially at a time when the Covid-19 pandemic caused a global scarcity of chips and semiconductors.

This decision by the Mumbai-based company will not only allow it to capitalise on a massive opportunity but will also result in shorter wait times for Tata Motors vehicles in the long run.

While speaking at the annual general meeting of the IMC Chamber of Commerce and Industry, Tata Sons Chairman N Chandrasekaran said that in a post-pandemic future, global supply chains, which are currently heavily reliant on China, would undergo significant changes, with firms shifting their dependency to other countries.

He said: “At the Tata Group, we have already pivoted into a number of new businesses like electronics manufacturing, 5G network equipment as well as semiconductors, in all probability.”

“On rebalancing supply chains, India can benefit from global shifts. The Tata Group has already set up a business to seize the promise of high-tech manufacturing for electronics. A domestic electronics industry could unlock $1 trillion in GDP and create millions of jobs,” he further added.

While a venture into the chip manufacturing industry would mean entering a lucrative business with consumers not only in India but throughout the world, it would also be important for captive use with Tata Motors, Tata Power and other Tata companies.

Currently, there is a global shortage of chips and semiconductors, which are required not only for cutting-edge technical items such as cellphones and computers but also for traditional industries such as an automobiles.

Almost a year after Covid-19 started limiting semiconductor chip output, many companies are experiencing peak shortages as demand for vehicles and consumer electronics continues to rise.

Due to the semiconductor shortage, many car manufacturers have found them in a challenging situation. Some manufacturers are now expecting it to last well into 2022.

Many car makers around the world either had to delay deliveries or postponed new vehicle launches — Jaguar-Land Rover, a Tata Motors business based in the United Kingdom, has done the same.

The Ford Mustang Mach-E is one of the most recent victims of the shortfall, with the carmaker informing customers that their vehicles will be delayed by six weeks.

Semiconductors are used in a variety of applications, including power steering, brake sensors, entertainment systems and parking cameras.

Silicon-based semiconductors will become one of the most important technological features of cars as they become more reliant on computer algorithms and data processing. They play an even more important role in the case of electric vehicles, where they are responsible for battery management algorithms.

These are used to operate pretty much any electronic component, including safety mechanisms like airbag deployment, lane change assist, emergency braking systems in conventional, internal combustion cars, which are facing production issues in India.

A passenger car contains over 1,000 semiconductors on an average.

With some of the world's largest semiconductor manufacturers, including the Taiwan Semiconductor Manufacturing Corp (TSMC), are working hard to scale up production, carmakers all over the world want to be the first in line to purchase them.

So, currently, it is uncertain how quickly some of India's largest automakers will be able to acquire them.

Meanwhile, a report revealed that GlobalFoundries, which is owned by Mubadala Investment Co. of the United Arab Emirates, announced in June 2021 that it will invest $4 billion in a chip manufacturing unit in Singapore to meet the world's increasing demand for semiconductors.

As per the company, the new semiconductor fabrication plant will be Singapore's most advanced chip manufacturing facility, supporting strong demand from the automotive sector as well as 5G device manufacturers.

After the completion of the construction of the plant, it is expected to be able to produce 450,000 wafers per year, bringing GlobalFoundries' annual output in the city-state to 1.5 million wafers.