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Tata Electronics looking for setting up its new facility in the Southern Indian States

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According to Raja Manickam, the chief executive of Tata Electronics owned Outsourced Semiconductor Assembly and Test (OSAT) unit, the company is in talks with significant global semiconductor businesses and OSAT vendors to delve into advanced packaging of semiconductor components. Third-party Integrated Circuit packaging and test services are provided by OSAT suppliers.

Manickam told ET that Tata Electronics has surveyed four states – Tamil Nadu, Karnataka, Telangana, and Odisha – as potential locations for its facility. Tata Electronics already has a plant in Hosur, Tamil Nadu, that is up and running.

“We’ve written up a report on pros and cons in all the four states. Hopefully, by mid-May, we’ll announce the location,” Manickam said. “We have not finalized or signed up with any of them yet but we will get into advanced packaging for sure,” Manickam, previously the founder of Tessolve Semiconductors, said.

However, the corporation was only looking for a technological partner for advanced packaging, not traditional packaging, which is the other segment of the packaging industry, according to Manickam.

Advanced packaging enables semiconductor makers to blend mature and cutting-edge chips in a single system for applications that require both, lowering prices. Heterogeneous integration is a trend that allows companies to combine multiple smaller chips instead of making a single large chip.

Larger chips often have poorer yields, which normally scale with chip size, so heterogeneous integration could save a lot of money. Tata Sons chairman N Chandrasekharan said last year that the salt-to-software conglomerate plans to enter the semiconductor manufacturing business.

“At the Tata group, we have already pivoted into some new businesses like electronics manufacturing, 5G network equipment as well as semiconductors,” he had said at the annual general meeting of the IMC Chamber of Commerce and Industry.

Tata Sons paid 1,884 crores for a 43.35 percent interest in telecom gear maker Tejas Networks Ltd last year. Tejas Networks revealed plans to buy Saankhya Labs in two stages earlier this year. Saankhya Labs, which was founded in 2007, has created a variety of system and semiconductor devices for cellular wireless, broadcast radios, and satellite communication ground terminals. Tata’s semiconductor goals are aligned with the acquisition of Saankhya.

The Indian government has announced a $10 billion (about Rs 76,000 crore) initiative to entice chipmakers from all over the world to set up shop in the country

Three consortiums have applied for incentives to produce chips and construct a fab: Vedanta-Foxconn, ISMC, and IGSS Venture. There is a “clamor for fab,” according to Manickam, and there is a sense that OSAT is a low-tech, low-margin company.

“People fail to understand that every chip that is made has to be packaged,” he said. “One wafer can have hundreds or maybe even thousands or tens of thousands of dies. So, each wafer will create, on average, at least 5,000 to 10,000 packages. It’s an exponential volume as compared to wafer fab,” he said.

Tata Electronics chose to package over fabs not only because it was quicker to set up, but also because it believes it is at an inflection moment

According to a recent analysis by global consulting firm McKinsey, the advanced packaging market was valued at $20 billion in 2020 and is expected to grow to $45 billion by 2026, when it would account for over half of all packaging revenues.

“Although leading-edge IDMs and foundries are driving packaging innovations, advanced techniques also create opportunities for other players across the value chain because they boost demand for new materials and new equipment,” according to the report.

Tata Electronics inked a Memorandum of Understanding (MoU) with the Tamil Nadu government last year to establish a factory for manufacturing mobile components at Krishnagiri, with an investment of Rs 4,684 crore.

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