Tata Sons’ electronics bet crosses $1.3 billion

Tata Group holding company invested last month ₹1,499 crore in Tata Electronics Ltd, a phone assembly and semiconductor venture, taking its total investment in the sector to $1.3 billion. This also makes Tata Electronics the third subsidiary of Tata Sons (the others are Air India Ltd and Tata Digital) to receive more than $1 billion from its parent in the last four years. Tata Sons’ total investments in the three businesses currently stand at $11.1 billion. Mint It was revealed when the applications of three affiliates were examined.

Tata Sons’ last annual report states that investment has been made ₹45,347 crore ($5.1 billion) at Air India since it acquired the state-owned carrier in January 2022. Tata Digital, the e-commerce business comprising BigBasket, Tata 1mg, Croma and Cliq, has raised around $4.7 billion ( ₹42,121 crore since its inception in March 2019).

New investments in emerging businesses are a key focus for the Tata Group, which directs its investments through the group’s holding company.

Tata Sons wants to pursue “manufacturing excellence at scale”, Chairman Natarajan Chandrasekaran wrote to shareholders in the Tata Sons FY25 annual report. Major Tata Sons shareholders include Tata Trusts, Shapoorji Pallonji Group and various Tata Group companies.

“At Tata Electronics, we are building a vertically integrated ecosystem for technology hardware and semiconductor manufacturing. It’s tough, but that’s why it matters so deeply to us,” Chandrasekaran wrote. “In the capital-intensive world of tech hardware, I’m told this is a good start.”

Emailed queries to Tata Sons and Tata Electronics remained unanswered.

Tata Electronics has been investing since the beginning of September 2020 ₹6,961 crore in iPhone assembly operations. Also spent ₹1,363.52 crore to purchase Wistron Corp’s plant in March last year and ₹1,650 crore to acquire 60% stake in Pegatron’s India facility. In addition, ₹50 crore invested in the semiconductor subsidiary. These amounts total approximately $1.3 billion investment by Tata Sons in Tata Electronics. The company is India’s largest assembler of Apple iPhones.

Tata Electronics announced last year that it would invest in chip production ₹1,18,000 crore ($13 billion) to set up two semiconductor manufacturing plants in Gujarat and Assam. The Gujarat facility, which has an investment of $11 billion, is owned by Taiwanese Powerchip Semiconductor Manufacturing Corp. is in partnership with.

Tata Electronics reported the following revenue: ₹66,601 crore in FY25, followed by Air India. ₹78,636 crore and more than double that of Tata Digital ₹32,188 crore as per Tata Sons’ latest annual report. Electronics business ended with an incident ₹70 crore loss, much less than before ₹10,859 crore losses from aviation ₹4,610 crore losses from e-commerce.

As Tata Electronics points out, this is no small feat. ₹66,601 crore revenue exceeds that of Titan ₹60,942 crore and close to Tata Power Ltd ₹66,992 crore. Of course, Tata Electronics remains a loss-making business, unlike the profitable businesses of Titan and Tata Power. Although Tata Electronics cut its losses by 92% ₹69.7 crore ($7.8 million) ₹iPhone assembly margins, which stood at Rs 825 crore ($93 million) a year ago, remain very slim for vendors like Foxconn.

Of course, production-linked incentives (PLIs) for smartphone assembly end next March and Tata Electronics is yet to announce its plan to reach profitability. Tata Sons chairman Chandrasekaran also serves on the board of Tata Electronics.

However, industry stakeholders are not worried about this situation.

“Smartphone PLI shows that Dixon is becoming a major company in India, while Kaynes and Syrma are also now on the growth path,” said Ashok Chandak, president of the Electronics and Semiconductor Association of India, an industry body. “These success stories have encouraged Indian conglomerates to join this space as well. While Tata was one of the early movers, Larsen & Toubro set up a dedicated subsidiary for fabled semiconductor engineering. The Murugappa group has also ventured into semiconductor testing and assembly, demonstrating the importance of electronics in India’s growth over the next decade.”

“The main objective of smartphone PLI was to bridge the cost disadvantage that startups would face when starting up in India, given that PLI came when the industry was still in its infancy. India now has a well-established last-stage assembly ecosystem and both India and companies like Apple have gained significantly from it. Now, with component incentives, we see the next phase of value creation will start happening and this will further strengthen the electronics ecosystem,” added Ankush Wadhera, managing director and partner and India leader – Semiconductors at Boston Consulting Group (BCG).

Tata Electronics employed 65,647 people. This figure exceeds 31,749 in aviation and 39,088 in Tata Digital.

Made in India ₹In the 25th fiscal year, electronic goods worth 11.3 trillion ($127 billion) were produced, an increase of 19%. ₹Finance ministry data showed that the electronics industry has become one of the fastest growing sectors, producing 9.5 trillion ($107 billion) in 24 fiscal years. Mobile phone exports account for approximately 18%, or $22.5 billion, of the share of electronics production. One third of this share of mobile exports was made possible by Tata Electronics, which generated $200 million in revenue. ₹62,962 crore ($7.1 billion). Tata Electronics won from this ₹23,462 crore ($2.6 billion) from exports to the USA and ₹14,255 crore ($1.6 billion) to Ireland, Apple’s European headquarters.

“India does not have a large presence in the value-added parts of the electronics manufacturing industry. Building a chip factory and increasing local value addition through components both require significant infusion of capital, and Tata Electronics’ ability to source this from its parent is a key strength for the company,” said Harshit Kapadia, vice president at brokerage firm Elara Capital. “It also benefits from the leverage of its conglomerate’s reputation; Apple, for example, is unlikely to do business with smaller electronics manufacturing firms as it ramps up local meetings.”

Kapadia noted that over the next decade, electronics manufacturing is expected to grow and outperform traditional sectors and indices, and Tata Electronics may see growth in volume and revenue.

Less than a year after Tata launched its electronics arm in September 2020, Intel Corp’s chief procurement officer Randhir Thakur joined as an executive. Thakur later left Intel and was appointed managing director of Tata Electronics.