Indian multinational conglomerate, Tata Group which had earlier announced plans of setting up a $300 million semiconductor manufacturing unit in India, might suffer hindrances in its plans due to lack of available raw materials, both domestically and globally, due to the ongoing pandemic, a new report suggests.
With an increased demand for consumer electronics during the Covid pandemic, semiconductor makers worldwide are suffering from supply issues, causing a global shortage.
Reportedly, the Tata Group has been in discussions with different states in the country to decide upon the area where they will build the plant and is planning to become an outsourced semiconductor assembly and testing facility.
It is expected that the group will be finalizing the location for the plant within this month only, to have it running around late 2022.
As per media reports, the facility will be assembling and testing semiconductor chips with sophisticated silicon wafers that will be sourced from semiconductor foundries such as Taiwanese TSMC.
As the Tata plant will be relying on offshore chip foundries for wafer production, the new report suggests that it will be vulnerable to disruptions in silicon wafer manufacture as the foundries are already suffering supply pressure due to increasing demand.
The report also warns that growing geopolitical tensions in the region as well as the emerging new variants of COVID-19 will be posing considerable risks to Tata’s plans. It adds that due to the new variants, semiconductor shortage will continue, especially in Asia, due to relatively low levels of vaccination among citizens.
Due to these various reasons, analysts expect that the chip shortage will continue into the next year, with supply issues continuing until 2023 at least.
Another downside risk that the report suggests is Tata Group’s lack of experience in the sector.
The new report has noted that while there is a huge potential in the domestic market for chipmakers, India’s position in the global semiconductor market will remain limited, even with Tata’s long-term investment.