Tata, Merck explore exclusive chemical deal for Dholera semiconductor facility

Tata Electronics is in discussions with German chemicals giant Merck for a potential exclusive long-term agreement, people aware of the developments told ET. The deal would see Merck become a primary supplier of specialty chemicals and materials essential for semiconductor manufacturing at Tata’s upcoming Dholera facility.

The Dholera fab, a 91,000 crore ($11 billion) project, is a joint venture with Powerchip Semiconductor Manufacturing Corp (PSMC) of Taiwan. It’s a cornerstone of India’s ambitious push to establish a domestic semiconductor ecosystem. As construction progresses and the plant gears up for production by 2026, securing a steady and reliable supply of ultra-pure chemicals is paramount. A potential partnership with Merck will help seal this gap, analysts said.

“Tata Electronics is in active negotiations with Merck,” said one of the persons. “ Tata is evaluating the offer and is yet to sign on the dotted line but securing a chemicals partner is very much on their agenda. It will boil down to whether they agree to the exclusivity.”


Semiconductor manufacturing uses more than 150 chemicals and over 30 gases and minerals in the production processes. Analysts said this exclusive partnership would provide Tata Electronics with supply chain stability, a critical factor in the volatile global semiconductor market and will help Merck make a foray into India's burgeoning semiconductor industry.

“We have been monitoring semiconductor manufacturing developments in India for the past couple of years,” a Merck spokesperson said. “We believe that India is becoming an increasingly important partner in the global semiconductor ecosystem. However, at this time it is too early to talk about concrete plans for India. We continue to closely follow opportunities that align with our strategic goals.”

Tata Electronics didn’t respond to queries.

Merck is a global leader in specialty chemicals and serves as a crucial ancillary supplier for both existing and future chipmakers, said Neil Shah, vice president of research at Counterpoint Research. It provides a comprehensive portfolio of high-purity materials, including chemicals, gases, and metrology and inspection solutions.

“These offerings support chipmakers throughout various stages of manufacturing, from deposition and etching to final quality control,” he explained. “An exclusive agreement between Merck and Tata Electronics would create significant strategic advantages for both companies. For Tata Electronics, an exclusive partnership would ensure a consistent, prioritized, and uninterrupted supply of critical materials, mitigating supply chain risks. Having a special price lock-in often comes with exclusivity.”

It will allow Tata Electronics to leverage Merck's extensive supplier experience and R&D capabilities. It could thus lead to the development of robust processes, improved manufacturing yields and an accelerated timeline for their chip production.

“For Merck, partnering with Tata Electronics, a key player in India's emerging semiconductor landscape, would be a major strategic win,” Shah said. “As India becomes a more important market for chip manufacturing, this partnership would provide Merck with significant scale and a strong foothold. This position would enable Merck to expand its operational base in India, invest in local R&D, and potentially benefit from government incentives.”

Merck will require a robust ecosystem to establish a successful chemicals plant in Gujarat. This includes not only reliable infrastructure--electricity, water, security, logistics--but also a well-developed upstream supply chain with local partners in raw materials to packaging. Shah said this “holistic ecosystem” is essential to support and sustain Merck’s operations.

ET was the first to report in February that Merck was looking to set up a specialty chemicals facility in India. In May, Union minister for electronics and information technology Ashwini Vaishnaw highlighted that Merck, among other companies, was gearing up for the growth of India’s semiconductor industry.