India’s Tata Group is planning a foray into semiconductor manufacturing as the coffee-to-cars conglomerate seeks to mitigate the pain from the global chip crisis as well as reduce dependence on imports.
Besides making chips, plans to manufacture batteries for electric vehicles will also be announced soon, N Chandrasekaran, chairman of Tata Sons, the group’s main holding company, said at an event in Mumbai on Friday.
Mr Chandrasekaran had spoken about evaluating partnerships for cell and battery manufacturing in India and Europe in Tata Motors' annual report in June.
The initiatives by the $103 billion Tata Group are aligned to Prime Minister Narendra Modi’s attempts to make India a leader in semiconductor production and reduce its reliance on imports amid global chain disruptions.
Several international chip giants including Intel and Taiwan Semiconductor Manufacturing are exploring India as a potential manufacturing base, the nation’s Technology Minister Ashwini Vaishnaw said on Thursday.
Car makers around the globe are grappling with a semiconductor shortage, exacerbated by pandemic lockdowns in China, which have hobbled the car and the electronics sector by raising input costs for makers.
“Supply chain is getting very precarious and uncertain,” Shailesh Chandra, managing director at Tata Motors Passenger Vehicles, said in an interview on Friday.
Lockdowns in China have worsened the visibility of semiconductors and the logistics have become the next challenge for Tata Motors given the lack of availability of containers, he said.
To mitigate the semiconductor crunch, Tata Motors is going for premium freight, finding alternatives for chips and buying them from the open market, Mr Chandra said.
He expects the shortage to persist for six months at least and sees the fourth quarter being more uncertain than the previous year.
The impact of the chip shortage is more “acute” in electric vehicles than petrol models, Mr Chandra said. The waiting period for electric vehicles at Tata Motors could be as much as six months, compared with four months for cars with internal combustion engines, he said.
Volvo Car has said it would have a hard time meeting its production forecast for this year due to issues procuring a specific type of semiconductor, while Renault earlier this month halted production of its new electric vehicle because of a lack of components.
Tata’s foray into semiconductor making will also help its group firm, Tata Motors, which makes the iconic Jaguar Land Rover brands and has suffered due to these shortages.
Tata Motors, which has a 70 per cent share of India’s nascent electric car market, also announced plans to launch its first ever pure electric car by 2025. The five-seater Avinya will have no petrol variants, Mr Chandra told reporters.
The company currently sells two battery-powered models, the Nexon EV and Tigor EV, but these cars also have variants that run on fossil fuels.