ET exclusive: Tata Electronics seals semicon deal with Tesla

Tesla is understood to have signed a strategic deal with Tata Electronics to procure semiconductor chips for its worldwide operations, officials close to the development told ET, underscoring the electric carmaker’s increasing interest in India beyond local revenue generation.

Executed discreetly a few months ago, this agreement is significant as it positions Tata Electronics as a reliable supplier for top-tier global clients seeking to establish a pivotal segment of their semiconductor value chain within India.

The US-based electric vehicle (EV) major is keen to enter India, the world’s fastest-expanding major automotive market. Tesla promoter Elon Musk is reportedly visiting India this month for a meeting with Prime Minister Narendra Modi. Musk is expected to announce potential Indian investments, including a commitment of funds toward EV manufacturing facilities. His firm is the world’s largest automotive company by market value.

Tesla and Tata Electronics, which is leading the Tata group’s foray into semiconductor manufacturing, did not comment. The value of the TeslaTata Electronics sourcing deal and other details could not be ascertained immediately.

Ashok Chandak, president of India Electronics and Semiconductor Association (IESA), said Tesla’s decision to create an ecosystem of local suppliers for electronics and subsystems shows it is not dependent on just one market. The major concern is local sourcing of semiconductors. “This needs improvement in the supply chain as value addition for the industrial and automotive segments is much higher,” said Chandak.

Although estimates vary, most industry experts believe Tesla is likely to invest at least $2-3 billion in India to manufacture electric cars, which have a small but expanding share in the local personal mobility market.

Recent policy changes have allowed automakers to import EVs priced at $35,000 or higher at a reduced import duty of 15%. This would, however, be contingent on automakers committing to invest $500 million within three years to establish manufacturing plants in India. Tesla might bet initially on premium, feature-led electric models for the Indian market, besides looking at manufacturing the entry-level electric cars locally.

Meanwhile, Tata Electronics has augmented its workforce by recruiting 50-60 top-level expatriates in recent months, leveraging their extensive expertise in semiconductor technology, strategic planning, and design to bolster its business operations.

Post-Covid, Tesla has been building components sourcing options beyond China for critical electronic, electrical and mechanical parts. The company, which is rather secretive about its suppliers, makes some of the electric components, such as electric motors, battery packs and chargers, while sourcing the sub-assemblies and rest of the parts from global suppliers.

BLUE CHIP TALENT
Randhir Thakur, chief executive and managing director of Tata Electronics, has been instrumental in roping in some top talent. He was named CEO in April 2023 and is an Intel Foundry Services veteran.

“Thakur’s huge experience and network has every top CXO in the semiconductor sector on his speed dial. He had been able to persuade several top global executives to join the organisation,” said a top official close to the development.

Tata Electronics has set up semiconductor manufacturing facilities in Hosur (Tamil Nadu), Dholera (Gujarat) and in Assam, with ambitious plans to expand operations to build a well-connected supply system in the country. It has invested $14 billion to date in the business, officials said.

Top officials close to the development said Tata Electronics has made significant investments in indigenous technology development for all these platforms and has put together a team with 1,000+ years of global domain experience to drive this project.