Facing rare earth shortages, India’s semiconductor ambitions encounter fresh challenges with Tata’s upcoming chip foundry plans.
India’s semiconductor ambitions face a potential hurdle as Tata Electronics prepares to operationalise its chip fabrication unit by mid-2027. Experts warn that limited access to rare earth materials critical for chip production could disrupt timelines and inflate costs, undermining India’s self-reliance goals.
The fab, being set up in Dholera, Gujarat, with support from Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC), is seen as a cornerstone of India’s semiconductor strategy. However, rare earth elements essential for chip equipment, clean rooms, and related materials remain largely controlled by a few nations, with China dominating the supply chain. Any geopolitical friction or trade restrictions could ripple through Tata’s project.
Rare earths like neodymium, dysprosium, and terbium are crucial for magnets, lasers, and polishing compounds used in semiconductor manufacturing. Global shortages or export curbs could limit availability, raising procurement challenges for India’s chipmakers. Analysts note that while India is working to develop domestic reserves and diversify sourcing, scaling such initiatives will take time.
Industry observers emphasise that ensuring a steady flow of these materials is as critical as building the fab itself. Without it, India risks delays in achieving its semiconductor production targets, which are central to reducing import dependence and supporting emerging sectors like electric mobility, defence, and telecom.
The government has pledged support through incentives and supply diversification, but uncertainty persists. As Tata’s $11 billion venture advances, securing rare earth access will remain a defining factor for India’s chip ecosystem.
