The Bengaluru Startup That Wants to Out-Manufacture Germany and Japan
India's manufacturing sector contributes roughly 17% of the country's GDP. Yet for decades, India has remained almost entirely dependent on precision machine tools imported from Germany and Japan — the two countries that have dominated advanced manufacturing technology for generations.
That dependency is about to be challenged. And the challenge is coming from a smart factory in Peenya, Bengaluru.
Ethereal Machines, the deeptech precision manufacturing startup founded in 2014 by Kaushik Mudda and Navin Jain, has raised $28.5 million in a Series B funding round led by Avataar Ventures, with participation from existing investor Peak XV Partners and other backers. The raise brings the company's total funding to nearly $50 million — and sets the stage for a manufacturing expansion that could genuinely alter India's industrial trajectory.
What Ethereal Machines Actually Does
Most people don't think about CNC machines in their daily lives. But they should. CNC — Computer Numerical Control — machines are the precision tools that manufacture the components inside virtually every sophisticated product humans use: the aerospace parts in commercial aircraft, the surgical tools used in operating rooms, the semiconductor components inside every smartphone, the defence hardware protecting national borders.
India has world-class engineers who can operate these machines. What India has not had — until now — is a company that builds them indigenously, at global standards, at a fraction of the cost of foreign competitors.
Ethereal Machines designs and manufactures proprietary multi-axis CNC machines — including its Aura three-axis and Nimbus five-axis platforms — and offers precision component production through its Machining-as-a-Service model, known as MaaS. Think of it as manufacturing on demand: clients across aerospace, defence, healthcare, semiconductors, and consumer electronics send their specifications, and Ethereal's smart factory produces the precision components they need, at micron-level tolerances, at speed.
The company currently operates a fully automated smart factory in Peenya, Bengaluru, running 24 hours a day, across three shifts, with over 60 machines on the floor. Avataar Ventures partner Anirudh Singh described the competitive edge plainly: their full-stack approach of building their own CNC machines and pairing them with intelligent factory software lets them operate at one-sixth the cost of global peers — with a roster of top-tier global clients already won as validation.
One-sixth the cost. That's not a marginal advantage. That's a structural disruption.
The $28.5 Million Will Build Something Historic
The fresh capital will be deployed across five clear priorities — each one a building block in Ethereal's ambition to become a global advanced manufacturing powerhouse.
First and most visibly: a 300,000 square-foot mega factory on the outskirts of Bengaluru, being developed under an MoU with the Karnataka government. When completed, this facility is expected to create over 2,000 jobs and become one of the largest automated advanced manufacturing facilities outside China. That's a bold claim — and one the numbers support. Scaling from 60 machines today to over 1,000 in the future is the vision CEO Kaushik Mudda has laid out.
Second: the development of India's first indigenous multi-axis CNC controller. The CNC controller is often described as the brain of a CNC machine — the command centre that governs every axis of movement and delivers the micron-level precision that high-tolerance manufacturing demands. Today, these controllers are almost exclusively imported. Building one indigenously would be a genuine technological milestone for Indian manufacturing.
Third: continued investment in Vesper — the company's proprietary AI-powered factory operating software that runs its smart factory. Vesper is what transforms a collection of machines into an intelligent manufacturing system — optimising production schedules, predicting maintenance needs, and ensuring quality at every step.
Fourth: strengthening capabilities specifically for the semiconductor sector. As India races to build a domestic semiconductor manufacturing ecosystem — backed by billions in government incentives and global chipmakers like Micron setting up in India — the demand for precision components that meet semiconductor fabrication standards is growing rapidly. Ethereal Machines is positioning itself as the indigenous supplier of choice for this critical industry.
Fifth: international expansion — building dedicated teams in the United States and Europe to serve global aerospace, defence, and medical device manufacturers directly, competing on the world stage against the German and Japanese incumbents.
The Growth Numbers Tell the Story
This fundraise isn't built on promise alone. Since raising its $13 million Series A round in June 2024, Ethereal Machines has tripled its MaaS revenue year-on-year and expanded production capacity tenfold. In two years, with $13 million, the company delivered 10x capacity growth. Now it has $28.5 million and a 300,000 square-foot factory to build.
The company is also backed by some of India's most credible institutional names — Peak XV Partners, Blume Ventures, and Avataar Ventures — alongside Intel CEO Lip-Bu Tan, whose personal investment signals that the global semiconductor industry is watching what Ethereal is building with genuine interest.
The Bigger Picture — India's Manufacturing Moment
Kaushik Mudda's words at the fundraise announcement carry real weight: "The world is actively looking for resilient alternatives in global manufacturing, and India has a once-in-a-generation opportunity to emerge as a serious deep-tech manufacturing powerhouse. Ethereal Machines is building that foundation — from precision CNC systems to intelligent factory software and large-scale automated manufacturing."
The geopolitical backdrop makes that opportunity even more real. US-China tensions have pushed global supply chains to actively diversify away from China. Europe's energy costs and demographic challenges are making Western manufacturing more expensive. India — with its engineering talent, cost advantages, and growing infrastructure — is being looked at as never before.
But wanting to manufacture in India and actually being able to manufacture at global precision standards in India are two very different things. Ethereal Machines is solving the second problem. And that, more than any government incentive or geopolitical trend, is what makes this company worth watching.
