Tata Electronics Private Limited — Combination C-2024/11/1208

Notice under Section 6(2) of the Competition Act, 2002 jointly given by Tata Electronics Private Limited and Pegatron Technology India Private Limited

CORAM:

Ms. Ravneet Kaur Chairperson

Mr. Anil Agrawal Member

Ms. Sweta Kakkad Member

Order under Section 31(1) of the Competition Act, 2002

1. On 14th November 2024, the Competition Commission of India (‘Commission’) received a notice (‘Notice’) under sub-section (2) of Section 6 of the Competition Act, 2002 (‘Act’) jointly given by Tata Electronics Private Limited (‘TEPL’) and Pegatron Technology India Private Limited (‘Pegatron India’). The Notice was filed pursuant to the execution of Binding Term Sheet dated 23rd September 2024 executed between TEPL and Pegatron Corporation (‘Term Sheet’) [hereinafter, TEPL and Pegatron India are collectively referred to as the ‘Notifying Parties’].

2. The Proposed Combination envisages the following steps:

Step 1: Acquisition of up to 80% of the fully paid-up equity share capital of Pegatron India by TEPL in the following 2 tranches:

(a) Initial Equity Infusion: Acquisition of 60% of the fully paid-up equity shares of Pegatron India by TEPL, by way of share subscription. Post the equity infusion, TEPL, Pegatron Corporation and Asuspower Investments Co. will hold 60%, 39.996% and 0.004%, respectively, of the fully paid-up equity shares of Pegatron India.

(b) Additional Equity Infusion: TEPL to infuse additional equity into Pegatron India and/or undertake secondary acquisition in subsequent tranches, such that TEPL’s shareholding will be 80% of the fully paid-up equity shares of Pegatron India with the remaining 20% being held by Pegatron Corporation (collectively along with Asuspower Investment Co.).

Step 2: On or around the date of Initial Equity Infusion by TEPL, TEL Components Private Limited (‘TEL’), a wholly owned subsidiary of TEPL, shall transfer its business undertaking by way of a business transfer to Pegatron India.

3. In terms of Regulation 14 of the Competition Commission of India (Combinations) Regulations, 2024, vide letter dated 28th November 2024, certain information and clarifications were sought from the Notifying Parties. The Notifying Parties submitted the response dated 12th December 2024, after seeking an extension of time. Since the response was not complete, another letter was issued on 23rd December 2024 and the response dated 30th December 2024 was furnished by the Notifying Parties.

4. TEPL is a greenfield venture and wholly-owned subsidiary of Tata Sons Private Limited with expertise in manufacturing high-precision components. It currently manufactures smartphone enclosures (i.e., the frame of the phone on which other components/sub-assembles of a smartphone are assembled) at its manufacturing facility in Krishnagiri, Tamil Nadu.

5. Tata Electronics Systems Solutions Private Limited (‘TESS’) [formerly known as Wistron Infocomm Manufacturing (India) Private Limited], a wholly-owned subsidiary of TEPL, is engaged in the provision of electronic manufacturing services (‘EMS’) for smartphones in India.

6. TEL, a wholly-owned subsidiary of TEPL, proposes to engage in the provision of EMS for smartphones and is in the process of setting up a greenfield facility for this purpose. It does not have any business operations at present.

7. Pegatron India is a subsidiary of Pegatron Corporation and is a part of the ‘Pegatron Group’. Pegatron India is engaged in the provision of EMS services for smartphones through its factory located in Tamil Nadu and exports its products to Taiwan, North America, Asia, and Europe. Pegatron India does not have any subsidiaries.

8. Pegatron Corporation has a wholly-owned subsidiary, Pegatron Electronics India Private Limited (‘Pegatron Electronics’), which will be engaged in the business of manufacture of electronic products such as laptops, computers (including its parts) wireless equipment, electric vehicle, etc. It is in the process of setting up its manufacturing facility in Chennai, Tamil Nadu and has not yet commenced its operations.

9. At present, TEPL, TESS, and Pegatron India have been certified only by Apple Inc. for the supply of smartphone enclosures and the provision of EMS.

10. It is submitted that the business activities of TEPL (including its subsidiaries) and Pegatron India exhibit a horizontal overlap in the market for the provision of EMS for smartphones in India. With regards to vertical overlaps, there is a potential for a vertical relationship in the manufacture and supply of smartphone enclosures in India (upstream) by TEPL and the market for the provision of EMS for smartphones in India (downstream) by Pegatron India.

11. The Commission decided to leave the delineation of the relevant market open, as it was observed that the Proposed Combination is not likely to cause appreciable adverse effect on competition in any of the plausible relevant market(s) in India.

12. Based on the submissions of the Notifying Parties, the Commission noted that the combined market share of TEPL (including its subsidiaries) and Pegatron India in the market of EMS for smartphones in terms of installed capacity, production, and in-India shipments are in the range of [5-10]%, of [10-15]% and [0-5]%, respectively.

13. Further, with regard to the vertical overlaps, the Commission noted that the market share of TEPL in the smartphone enclosures market is minuscule, in terms of volume. The market share of Pegatron India in the market of EMS for smartphones in terms of installed capacity, production, and in-India shipments are in the range of [0-5]%, [5-10]% and [0-5]%, respectively. Based on the foregoing, the Proposed Combination is not likely to foreclose competition in any segment.

14. Considering the material on record, including the details provided in the Notice and the assessment of the Proposed Combination based on the factors stated in Section 20(4) of the Act, the Commission is of the opinion that the Proposed Combination is not likely to have appreciable adverse effect on competition in India. Therefore, the Commission approves the Proposed Combination under Section 31(1) of the Act.

15. This order may be revoked if, at any time, the information provided by the Notifying Parties is found to be incorrect.

16. The information provided by the Notifying Parties shall be treated as confidential in terms of and subject to provisions of Section 57 of the Act.

17. The Secretary is directed to communicate to the Notifying Parties accordingly.