Tesla Urges India For Key Components In Global Supply Chain Expansion: Report

In a bid to diversify sourcing beyond China and leverage India’s semiconductor capabilities, global EV manufacturer Tesla is planning procurement options from US memory chip maker Micron and Murugappa Group’s CG Semi.

“Tesla spoke to representatives from the three large semiconductor facilities that have taken off in India — Micron, CG Semi and Tata Electronics,” people close to the development told ET. 

This comes a few days after the EV major inked a strategic deal with Tata Electronics to acquire semiconductor chips for its global operations.

Last week, Prime Minister Narendra Modi discussed collaboration on technology and innovation with Tesla’s chief executive Elon Musk. The latter is also planning to visit India later this year.

The report further mentions that Micron’s Gujarat facility will focus on assembly and test manufacturing, particularly automotive-grade dynamic random-access memory (DRAM) chips essential for Tesla’s computer processors.

CG Semi’s OSAT facility will have a broad scope, supporting outsourced semiconductor assembly and testing.

Tata’s fab and OSAT facilities are expected to support legacy-node chips, which remain critical for automotive electronic control units (ECUs) and specialised vehicle computers. 

It is pertinent to note that the Musk-led companies, Starlink and Tesla, have been looking to enter the Indian market for quite some time now. The EV giant has also initiated its recruitment plans in India.

The Indian government, too, seems to be welcoming the global EV players, with the Centre eyeing to slash import duties on premium EVs (priced above $35,000) from 110% to 15%, but only for automakers meeting certain conditions. Meanwhile, a bilateral trade agreement between India and the US is already underway. 

Why Is Musk Interested In India

Tesla, which has been considered as one of the fastest expanding EV companies,  has traditionally relied heavily on Chinese semiconductor fabs, especially for mature-node chips critical to its Shanghai Gigafactory operations. 

But with the rising geopolitical tensions, increasing costs and China’s 80% plus retaliatory tariffs on semiconductor imports have prompted Tesla to rethink and diversify its sourcing strategy beyond China and Taiwan.

India, amid this dynamics, presents itself as a serious alternative for semiconductor manufacturing and packaging for Tesla. 

Not to forget, there are already several significant investments underway, including Tata Electronics’s INR  91,000 Cr to establish a semiconductor plant in Dholera, Gujarat and an outsourced semiconductor assembly and test (OSAT) facility in Morigaon, Assam. 

Moreover, Murugappa’s CG Semi is also setting up an OSAT facility in Sanand worth INR  7,600 Cr, and Micron is building a large assembly, testing, marking, and packaging (ATMP) plant in Sanand worth over INR 23,000 Cr.

These Indian facilities are expected to serve both domestic and international demand, helping global companies like Tesla derisk their supply chains by reducing overdependence on China and Taiwan.