JULY 20228TATAS TO BE INDIA'S FIRST SEMICONDUCTOR POWERHOUSEndia's largest electric carmaker, Tata Motors, and Japanese chip manufacturer, Renesas Electronics, are partnering to design and develop semiconductors. The tie-up will help Tata Motors tide over the global auto chips crunch that has affected its earnings and resulted in production cuts and even temporary plant shutdowns. Designing chips in collaboration with Renesas will come in handy for the current and newer electric cars to be made by Jaguar Land Rover.Electric cars are the future of the auto industry. Tata Motors, which sold 19,105 electric cars last year, a more than a four-fold jump from the 4,218 in the year ended March 2021, has doubled down on its investments in the segment. Tata Motors had a market cap of $17.5 billion as of 29 June; the electric car division managed to raise $1 billion from TPG, the private equity group, at a $9.1 billion valuation in October last year.As car makers across the world look to make electric cars, computing power has emerged as the new horsepower. More microchips, such as the ones Renesas makes, are getting embedded in cars. These microcomputers control varied functions from fuel injections to running infotainment systems and acting as the car's brain for cruise control.One reason carmakers have struggled to find enough chips is because the small semiconductor manufacturers have given priority to mobile phone manufacturers. Renesas, which ended with a little over $9 billion in revenue last year, makes almost 46% of its sales from carmakers. This is unlike most other chip makers, which make the bulk of their sales from the consumer electronics industry.What's the lure for Renesas? The Japanese chip maker will probably look to leverage the over $10 billion in incentives on offer from New Delhi for setting up chips-making factories in India, tipped to be one of the world's largest electric car market. While none of the global chip makers have so far taken up the offer, the Tatas may be interested in setting up a plant. And that is the other reason why the tie-up with Renesas should be watched closely.For it's been clear for a while that beyond developing e-commerce capabilities in its retail business, the Tata Group aims to build India's first homegrown firm with capabilities in the 5G wireless systems and semiconductor design. Its partnership with Renesas is a step toward realizing this goal. The know-how developed by the two could serve Renesas in its home market, as the Japanese, like Indians, buy a lot of small cars.Tata's foray into these new areas started when it managed to get on board Intel Corp.'s chief supply officer and head of chip business, Randhir Thakur, as a director at Tata Electronics Ltd in April 2021. Thakur, a semiconductor industry veteran, who is the head of Intel's standalone foundry business, is helping Tata Electronics gain the expertise needed to design and manufacture chips.It isn't surprising that the strategic partnership announced also covers Tejas Networks Ltd. In July last year, Tata Sons agreed to pick up a 43.3% stake in IEditorial Exclusive
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