Tata Electronics eyes Malaysia foray via chip fab acquisition
Tata Electronics
is in talks with several global semiconductor companies including
X-Fab
,
DNeX
and
Globetronics
to acquire a fabrication or outsourced semiconductor assembly and test (OSAT) plant in Malaysia, according to people in the know. The move is aimed at bolstering the Tata Group company's knowledge and talent base before entering the semiconductor assembly and packaging business in India.
KC Ang, who was appointed president and head of Tata Semiconductor Manufacturing in April this year, is driving these acquisition efforts, the people said. 'Globetronics and DNeX's SilTerra facility are among the front runners to be acquired by Tata Electronics,' said one of the people.
Tata Electronics is investing more than Rs 91,000 crore to set up a semiconductor fab unit at Dholera, Gujarat, and Rs 27,000 crore in an OSAT facility at Assam's Morigaon.
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"Running a fab is not going to be simple and Tata Electronics is aware of that," a second person said.
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"These potential acquisitions are being explored in Malaysia because it is one of the most economical options and talks have been going on with different players since April this year,' this person said. 'For the Tatas, it represents an opportunity to get the knowhow on how to run a fab or advanced packaging facility while also providing a training ground for Indian talent to learn how to run these high-tech facilities."
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Queries sent to Tata Electronics, X-Fab, DNeX and Globetronics remained unanswered as of press time Monday.
Semicon hub
Malaysia's expertise in assembly, testing, marking and packaging (ATMP) along with its mature ecosystem, abundant skilled workforce, robust supply chain and government support make it a preferred destination, according to analysts.
"If Tata were to have a partnership or presence in Malaysia, it would enable Tata to develop expertise in ATMP, and it would complement the wafer fabrication and OSAT (operations) in India," Counterpoint Research senior analyst Parv Sharma said. 'It would also de-risk Tata from current semiconductor tariffs and provide a risk-free supply chain to serve a wider customer base globally," he added.
Also, the Malaysian government's National Semiconductor Strategy, announced in May 2024, offers a significant incentive structure to attract investments.
Indian companies are aiming to acquire manufacturing grade technology (MGT) from Malaysia for OSAT projects in particular, as it is the longstanding hub for both legacy and advanced packaging.
"MGT can only come from an established player in the semiconductor industry who has IP defensibility for its technology and has the legal rights to license it to India," consultancy firm Fab Economics' CEO Danish Faruqui said.
Malaysia holds 13% of the global market for chip packaging, assembly and testing services, as per a February 18 report by the Malaysian Investment Development Authority.
Ripe for acquisition
Typically, semiconductor businesses that are financially stressed and are looking to get a boost by licensing technology and/or expanding packaging capacity with new partners, are the most preferred targets by Indian players.
"Globetronics, an OSAT player from Penang, Malaysia, has suffered multiple financial blows as recently as in 2024,' said Faruqui. Key public and private stakeholders had rolled back their positions in the company, necessitating boardroom changes and strategies for new partnerships and revenue streams, he added.
As per Fab Economics, DNeX's SilTerra facility in Kulim is also being deemed a 'lucrative target' for Indian players for low-cost, high-fidelity technology licensing on the fabrication side. SilTerra is a semiconductor wafer foundry offering fabrication and design support services for integrated chips in various technologies.
DNeX acquired a 60% stake in SilTerra in 2021 while the remaining 40% was acquired by Beijing-based Integrated Circuit Advanced Manufacturing and High-End Equipment Equity Investment Fund Centre (CGP Fund), which is a Chinese investment fund focused on the semiconductor industry. The total acquisition cost was 273 million Malaysian ringgit (about $64 million now).
X-Fab is a German specialty foundry group that has six wafer fabs located in Malaysia, Germany, France and the US. Located in Kuching, the capital city of Sarawak, the X-Fab facility in Malaysia manufactures wafers on modular CMOS technologies in geometries ranging from 350 nm to 180 nm.
CMOS (Complementary Metal-Oxide-Semiconductor) is a type of technology used in computer processors, memory chips, and other electronic components.
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