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India touted as chip investment alternative amid regional risks

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PENANG, Malaysia — Tata on Wednesday made its case for India as an alternative destination for semiconductor manufacturers concerned about potential geopolitical and natural disaster risk in other parts of Asia.

Raja Manickam, CEO of Tata Technologies, the outsourced semiconductor assembly and test (OSAT) arm of Tata Electronics, touted India, alongside Southeast Asia, as a destination for chipmakers, citing its attractive location with easy access to land and sea transportation. OSAT vendors provide third-party integrated circuit-packaging and test services.

“It’s always location, location and location,” Raja told a semiconductor conference organized by the SEMI industry association in Penang, an island state in Malaysia. He said that currently, semiconductor manufacturing is carried out largely in parts of Asia prone to “geopolitical” worries and “natural disasters.”

While Raja did not elaborate, Taiwan and South Korea, the leading chip industry players in the region, face concerns over tensions with China and North Korea, respectively. China, which is strengthening its semiconductor industry, presents business uncertainties amid economic and security issues with the U.S. Japan, another major player, as well as Taiwan suffer frequent earthquakes.

The comments by Raja, a Singaporean, came as the Indian government previously announced a $10 billion incentive program to develop a semiconductor ecosystem in the country.

“The government has done its part and the respective states are also competing with their own incentive packages,” Raja said. “It is on the part of the Indian private sector to step up.”

Raja also said that while India needs the global semiconductor industry to invest there, the sector will also need the country of 1.3 billion people to achieve its desired $1 trillion market size.

“Many big semiconductor [companies] have research and development based in India, so it’s only logical for the research centers to be surrounded by manufacturing plants,” he said.

India has a large workforce with “deep and scalable engineering talents,” he said, adding the large population of young people also “offers a massive end-user market.”

Speaking at the same conference session, Loy Hwee Chuan, executive director for telecommunications, media and technology at Singapore’s DBS Bank, concurs that India could be a preferred destination for new semiconductor investment as companies take advantage of the “China plus one” strategy.

“[The] overall semiconductor market in India is expected to grow at [an] 18.8% compound annual growth rate, reaching $64 billion in 2026,” he said. “We would be able to see more investments in India and Southeast Asia as manufacturers adopt the ‘China plus one’ strategy,” he added.

“China plus one” refers to a movement among manufacturers to set up production facilities in other countries as a hedge against vulnerability to a range of political, business and trade uncertainties.

The country has set a target to become 70% self-sufficient in semiconductor production within a decade amid U.S. moves to cut the country off from key semiconductor supplies. The Chinese government is also looking to boost its semiconductor industry through huge investments and incentives like tax breaks.

Raja, who joined Tata Electronics in 2021, founded Tessolve Semiconductors in 2003 before selling it to Hero Electronix in 2016. His appointment was part of a big bet salt-to-steel conglomerate Tata Group took in its venture into the semiconductor industry.

“When Tata does something, its usually huge and Tata Sons Chairman Chandra (Natarajan Chandrasekaran) has already signaled that semiconductors is going to be one of his key priorities,” Raja said.

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