In less than a year, the Tata Group has unveiled its ambition to corner a significant chunk of India’s future high-tech manufacturing. In November last year, it bought the India manufacturing facility of Taiwan’s Wistron, becoming the first Indian company to join the Apple supply chain as an iPhone assembler. Four months later in March, ground was broken for two Tata semiconductor plants: a $11 billion semiconductor fab facility, the country’s first, to be built by the Tata Group at Dholera in Gujarat and another unit proposed by the conglomerate, a Rs 27,000 crore chip assembly, testing, marking and packaging facility at Morigaon in Assam.
Now, Apple’s another Taiwanese contract manufacturer in India, Pegatron, is in advanced talks to sell a majority stake in its iPhone manufacturing unit near Chennai to Tata group, ET has reported based on information from sources.
Tata’s rapid moves in the high-tech manufacturing space herald the rise of a national champion in two sectors supported by heavy government subsidies under the Production Linked Incentive (PLI) scheme. Its new ventures will boost the government’s Make-in-India programme, with the logo of a lion, which the government has been promoting to turn India into a manufacturing powerhouse.
The rise of a national champion
Asked about the potential Tata acquisition of Pegatron’s India business, Ashwini Vaishnaw, the minister for electronics, IT and railways told ET, “Happy to note that Indian champions are emerging in mobile phone manufacturing. As the sector grows, more and more young citizens are finding new employment opportunities.”
After Tata’s Wistron unit buy last year, Rajeev Chandrasekhar, the minister of state for electronics and information technology, had said, “I think Tata’s entry definitely signals that the Indian EMS (electronic manufacturing service) has (now) a giant Indian company which does manufacturing for global brands (in the) present and is maturing now,” he said.
The concept of national champions emerged in Europe with companies such as Germany’s Siemens and the UK’s British Steel and was further popularised by South Korean family businesses called chaebols such as Hyundai, Samsung and LG. With big incentives, governments helped build conglomerates to industrialise the country which in turn worked in national interest, creating jobs, promoting exports and making the country a global tech power. Such national champions are often found in strategic sectors such as defence with significant national interest. The Indian government’s push to turn the country into a manufacturing power involves PLI schemes worth $24 billion covering 14 sectors ranging from toys to chips. Tatas, besides many other big companies, ride on the PLI scheme to enter smartphone and chip manufacturing.
While PLI is also meant for a large number of smaller companies in various sectors, manufacturing of smartphones and chips requires big, established players with deep pockets. The Tata conglomerate has been a national champion since colonial times. It is the only business house that has remained in step with India’s industrial journey for close to a century: from steel to aviation to automobiles to software, Tata has provided heft to India’s various industrial sectors, often as the first mover. After pioneering the first industrial age in India by making steel indigenously, Tata will now usher in the fourth industrial in the country by making chips.
India has slowed down on the manufacturing front and needs to double down on electronics manufacturing services – designing, manufacturing, testing components and assemblies – for original equipment manufacturers, Tata Electronics Chairman Banmali Agrawala has said recently. “Our share in the global trade in manufacturing is negligible, so there is ample room for growth. Electronics, on its own, has a global trade worth $5 trillion. Given the pace of digitalisation the world over, it is only going to grow, and this is something India should be after,” Agrawala said, adding that India’s domestic consumption is not going to be enough to be able to achieve sustained economic growth.
Tata’s tech play
The Tata Group has ambitious plans to expand further in tech sectors. Its anticipated capital infusion into new business areas and group priorities – semiconductors, defence, electric vehicles, and Air India, for instance – is set to exceed $120 billion in the coming years, ET has reported recently based on information from sources. Initial assessments had pegged about $90 billion of capital deployment by 2027. The lion’s share of investments is earmarked for capital-intensive pursuits like semiconductors and Air India, marking the largest domestic investment commitment in the conglomerate’s history. The group has also announced a 20-gigawatt battery storage factory in Gujarat within the next few months besides a new electric car battery plant in Bridgwater, England, in a venture valued at $5 billion to support its automotive transition to electric vehicles.
“The Tata Group is making bold, futuristic bets toward nation-building and scale. Just as Jamsetji Tata made audacious moves in steel, the Tata Group is now venturing into semiconductors and batteries,” the CEO of a leading mutual fund told ET recently. “The Tata Group’s DNA has always been about taking bold risks, and with N Chandrasekaran at the helm, they have the right leader.” “Establishing a semiconductor plant from scratch in the country is no easy feat. With no semiconductor ecosystem in India, significant investments and effort will be required,” he said.
Ishaat Hussain, former director of Tata Sons, the holding company of the Tata Group, has highlighted India’s conducive scale for the group to explore new growth opportunities. “The emergence of a digital economy presents Tata Group with opportunities to strategically position itself for growth,” he told ET recently. “With a healthy cash flow, the group can strike a balance between existing and new growth businesses, be it Air India, semiconductors, or batteries. As the economy grows and per-capita income rises, demand will never be a constraint for the group. Tata’s unparalleled reach in India positions it to seize future opportunities.”
