Tata Electronics Pvt. Ltd has rapidly built a network of technology suppliers outside China to reduce the risk of supply disruptions at India’s largest semiconductor assembly facility it is building in Assam.
Mint has identified at least nine non-Chinese suppliers—including Singapore’s ASMPT, the Netherlands’ Nexperia, Japan’s Fujifilm and Malaysia’s Kelington—that Tata Electronics has signed up for what will be India’s third outsourced semiconductor assembly and test (Osat) facility, slated to start production in December. These vendors will supply a wide range of equipment and raw materials, and provide services to support Tata’s chip packaging and assembly operations, two senior executives with direct knowledge of the matter said.
“Overall, the goal for Tata Electronics is to develop and maintain a widely diversified supply chain of vendor partners that are not concentrated in one geography. The idea is that in the current world, with unpredictable tariffs and geopolitical bargaining, India’s semiconductor operations, which are finally on the verge of actually commencing, should not be prematurely halted because the commercial companies subsidized using public money are abruptly cut off from supplies of critical components,” one of the two executives said on the condition of anonymity.
The strategy is driven by technology export curbs put in place by various countries including China, as well as recent disruptions arising from the war. By cultivating new vendor networks, Tata aims to ensure India’s flagship semiconductor venture remains resilient against potential trade blockades, retaliatory mineral curbs, and broader geopolitical shocks.
The non-China partnerships include ASMPT for training and servicing software, spares, wirebond circuitry and integrated circuit assembly; Nexperia for bringing European semiconductor supply chain vendors to India and chip testing and manufacturing of automotive products; Fujifilm to localize production and sourcing of semiconductor raw material; and Kelington for machinery and infrastructure, according to the two executives cited earlier.
Diversification drive
Typically, Osat supply chains have 55-60% of their suppliers based in China, the second executive said, without sharing an estimate on Tata’s dependence on China. The first executive added that for the company, “the goal was not to leave China and China-based partners out—but to build a diversified set of alternatives.”
Operated under Tata Assembly and Test (TSAT) Pvt. Ltd, the Osat plant in Assam’s Jagiroad was announced on 29 February 2024. The project had an initial net budget of ₹27,000 crore, alongside Tata’s commercial chip fab in Gujarat’s Dholera, announced at a net project cost of ₹91,000 crore. A semiconductor fabrication plant manufactures the actual silicon wafers containing numerous transistors, while an Osat facility cuts them into individual chips, packages them in protective housings, and tests them for final use. Both projects are backed by state and central subsidies totalling 70% of the net capital required, leaving the Tata Group to invest ₹35,400 crore into its two initiatives.
The second executive said the move to diversify the supply chain “is a part of Tata Electronics’s long-term boardroom strategy.”
“While the general perception could be to see such a diversification as an anti-China policy, that is not quite the case. The main point of focus here should be that a geopolitically diversified supply chain is the need of the hour for various reasons. Quite simply put, outages of critical gases due to the Middle East war is one reason why suppliers should also be located elsewhere, in order to see how far a critical commercial venture that operates in semiconductor assemblies can be protected from sudden global supply chain shocks,” the executive added.
Tata Electronics did not respond to emailed questions.
Early birds
Tata’s early rivals in the nascent industry include US chipmaker Micron, alongside domestic players Kaynes Technology, CG Power, and an HCL–Foxconn joint venture.
Tata Group holding company is the parent of Tata Electronics, which is leading the group’s push into high-tech manufacturing, including assembling iPhones for Apple. Tata Electronics is also building its semiconductor business through TSAT, which has yet to start generating significant revenue. Over the past three fiscal years, it has incurred ₹575.54 crore in losses, though such initial losses are common for startups in capital-intensive sectors.
Industry stakeholders said the Assam unit will be a key part of the profitability drive for the larger Tata Electronics umbrella, which includes the entity’s smartphone assembly division and a third entity that operates the pure-play semiconductor fabrication plant in Gujarat’s Dholera.
“Tata’s semiconductor assembly project is expected to lend scale to the company’s chip ambitions, and the Osat is expected to become operational first—before Tata’s chip fab also begins. For now, Tata’s electronics assembly business will continue to generate the most volume, before its semiconductor business ramps up overall margins. This will be its differentiating call against other electronics manufacturing services firms,” said Harshit Kapadia, vice-president at brokerage firm, Elara Capital.
Ashok Chandak, president at industry body India and Semiconductor Association (IESA), added that Tata Electronics “is a very significant part of India’s semiconductor story, and both its fab and Osat will play critical roles in helping India climb up the semiconductor value chain—and build a robust supply chain in the country for future such facilities to be built at scale.”
Tata Semiconductor’s Jagiroad Osat is expected to commence operations by December this year, state chief secretary Ravi Kota said at a press event on 21 September. The company’s first facility is spread across 592 acres of land, and is currently already operating at one-fourth of its capacity, which is slated to scale up to 48 million chips per day when it is fully operational.