3 min read.Updated: 13 Aug 2021, 01:28 AM ISTVarun Sood
Chipmakers such as Intel have set ambitious budgets to shore up output as firms across industries stare at chip shortages
The Tata group has named Intel Corp.’s chief supply officer and head of chip business Randhir Thakur as a director at its subsidiary Tata Electronics Ltd as it looks to enter chip manufacturing, the bedrock of modern technology.
Thakur is a semiconductor industry veteran who was entrusted by Intel’s chief executive Pat Gelsinger to head the chipmaker’s standalone foundry business in March. His induction is aimed at helping Tata Electronics gain the expertise needed to design and manufacture chips, according to people familiar with the development.
The move comes amid a global shortage of semiconductor chips on account of conflicts with their leading supplier China. The automotive industry has been a major casualty of the chips shortage.
For now, it is not clear if Tata Electronics will manufacture chips or design them, or do both, as the company is still in the process of completing a planned $750 million facility for making electronic components in Hosur, Tamil Nadu.
Neither is it clear if Thakur’s appointment on the board of Tata Electronics signals a deeper partnership with the largest chipmaker by sales, under which the homegrown company could supply key parts for Intel’s foundry business.
Tata Electronics is expected to appoint a chief executive officer in the coming two months.
Calls and a text message to Thakur seeking comment went unanswered. A spokesperson at Intel didn’t respond to an email seeking comment. A spokeswoman for Tata Sons declined to comment.
Nipun Aggarwal, a senior vice-president at Tata Sons who oversees strategy and M&A for the steel, infrastructure and defence business; Banmali Agrawala, president, infrastructure and defence and aerospace at Tata Sons; and Ajoy Mukherjee, a former human resources head at Tata Consultancy Services Ltd, are the three other directors at Tata Electronics.
“The group has entered the electronics and semiconductor business. We are taking baby steps," said an executive at the Tata group on the condition of anonymity.
Earlier this week, Tata Sons Ltd chairman N. Chandrasekaran said the group was working to tap into the business offered by high-tech manufacturing of electronics and also possibly semiconductors.
“India can significantly benefit from the geopolitical shifts that we are seeing. 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," Chandrasekaran said at an event organized by the IMC Chamber of Commerce and Industry.
The geopolitical shift the Tata Sons’ chairman was referring to is America’s technological cold war with China, especially as Asia is home to 80% of the chip-making capacity.
US chipmakers such as Intel have outlined an ambitious budget to shore up their production as companies across industries—from telecoms to car manufacturers—stare at chip shortages.
Intel has outlined a $20 billion spending over the coming years to build two new chip facilities or fabrications plants in the US and to partner with other chip manufacturers, including Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co., to supply it with key components.
Intel believes its design capability, along with the manufacturing prowess of third party chip manufacturers, should help it churn out chips swiftly.
This opportunity is what Tata Electronics is eyeing—although for now it is very early in its efforts to really become a third-party chip manufacturer.
For now, Tata Projects is building Tata Electronics’ facility and the manufacturing plant is expected to be complete in the coming 12 months, according to a second executive familiar with the development.
The Tata group’s equity commitment to the project is about $250 million, while the remaining $500 million has been raised through debt.
“The repayment of term debt shall start from September 2024 while the project is scheduled to be commissioned in FY22, thereby limiting any liquidity risk for the project," said an India Ratings and Research report, dated 23 march 2021. “The loan facility will have a door-to-door tenure of seven years with an effective average tenure of about five years."
Oddly, Tata’s latest venture into electronic and semiconductor manufacturing through Tata Electronics started as TRIL Bengaluru Real Estate Four Pvt., which was incorporated in April last year. Five months later, in September, it changed its name to Tata Electronics.