Tata Consultancy Services (TCS) is working with group peer Tata Electronics Pvt. Ltd as the conglomerate races to roll out first made-in-India chips by 2026, a top executive at the country’s largest technology services provider said.
TCS, which designs and engineers semiconductors for clients, has numerous “touch points” with chip fabrication where Tata Electronics has taken the lead, said Sreenivasa Chakravarti, vice-president and global head of TCS’s digital engineering business. Other common services, according to him, include software and intellectual property (IP)-driven products for semiconductors.
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“We are part of the same group as Tata Electronics, and there are leverage points that we are working on together. The two companies sit at different parts of the value chain, so we are leveraging our core expertise in what we excel at for this,” said Chakravarti, one of the key executives in TCS’ global technology and services vertical.
Three fabs approved
In February, the India Semiconductor Mission approved three chip facilities to develop the strategically critical sector in the country. Tata Electronics is building two of these facilities: an $11-billion greenfield chip fab with an initial capacity of 50,000 wafers per month, in partnership with Taiwan’s Powerchip Semiconductor (PSMC), in Gujarat’s Dholera; and a $3.26-billion project in Assam to assemble and test chips.
The first chip from Assam will roll out by late 2025 or early 2026, according to the group, serving sectors including automotive, power, electronics, consumer, and medical.
“We see so many companies come to India and set up shop here in order to build technologies and services for global markets, but there is an addressable market for semiconductors in India as well,” he said. “The challenge, therefore, is to build for India, from within India.”
A first for tech services firm
According to Omkar Tanksale, senior research analyst for IT at brokerage firm Axis Securities, TCS is the first technology services company in India that built core semiconductor engineering and services capability.
“While fellow firms such as Infosys have semiconductor software expertise, TCS is the only tech services provider that can cash in on India’s semiconductor push,” Tanksale said. “Its work with Tata Electronics, as well as global firms such as Fairfax and others will take time to play up in revenue because of the business cycle, but TCS has core capability that can help them cash in on India’s semiconductor rush.”
TCS has a sizeable play in semiconductor design and engineering and software development for semiconductor applications worldwide. However, it is yet to venture into chip manufacturing, unlike its fellow IT services peer HCL Technologies, which in January announced a joint venture to set-up a chip testing plant with China’s Foxconn.
“We play a key role for our clients in understanding the core technologies and how semiconductor design needs to evolve,” Chakravarti said, adding that TCS focuses on software-driven chip research and engineering to meet client needs. That, he said, helps companies identify the right product-market fit for their semiconductor operations—a factor that is tipped to help Tata Electronics as well once its fab in Dholera, Gujarat becomes operational.
Geopolitically sensitive
Semiconductor operations have now become geopolitically sensitive, and projects like Tata group’s semiconductor push helps develop core competencies in-house, according to Chakravarti.
“It’s not like each country will reinvent the tech stack entirely. Our idea is that semiconductor products and IPs, once developed domestically, will ensure that security backdoors and other discrepancies that could lead to a tech compromise are filled,” he said. “This approach will remain, and as service providers, we’re always ready to ensure that requisite confidentiality is maintained across teams.”
In FY24, TCS’s digital engineering business’s revenue declined 1.5% on year to $2.47 billion. In the company’s March quarter earnings call in April, K Krithivasan, chief executive of TCS, attributed slower revenues in select verticals such as technology services to slowdown in tech spending among clients amid inflation concerns.
Chakravarti, however, said, “There are business cycles that are more driven by technology itself, which requires businesses to focus on among clients. Some of these bets take time to be identified, which ensures that we don’t find any worrying slowdown among client spending in the semiconductor space.”