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India Struggles To Catch Up As Global Chip Race Heats Up
India’s Chip Dream Takes a Step Backwards: Embracing the Value Chain to Establish Its Niche in Global Semiconductor Industry
The global semiconductor market is highly competitive, with major players like Taiwan, South Korea, and the United States vying for dominance. For India to establish itself as a significant player, it needs to develop a robust ecosystem that can compete with these giants. One way to do this is by focusing on assembly, testing, and packaging (ATMP), also known globally as outsourced semiconductor assembly and test (OSAT).
OSAT refers to the process of manufacturing integrated circuits (ICs) at third-party facilities. These facilities are equipped with state-of-the-art equipment and employ highly skilled engineers and technicians. By outsourcing IC production to OSAT, companies can tap into the latest technology while minimizing their own investments in infrastructure and talent.
Industry experts argue that India’s entry point into the global semiconductor industry should be through OSAT rather than fab-first (fabrication). Rajesh Singh, vice president of business development at Mumbai-based semiconductor test and design firm, VLSI Technology, states, “The natural evolution for most companies has been, first, can I look at localisation of the back end, the OSAT piece?” He notes that it’s a more feasible and less capital-intensive approach.
Singh’s sentiments are echoed by other industry leaders, who point out that establishing an OSAT capability allows India to leverage its strengths in engineering, manufacturing, and quality control. By focusing on the back-end of the semiconductor value chain, Indian companies can differentiate themselves from their global peers.
One key advantage of OSAT is its lower capital expenditure requirement compared to building a full-scale fab. Vivek Bhardwaj, partner at law firm, LexOrbis, notes that “OSAT requires significantly less upfront investment than setting up a full-fledged fab.” He highlights the importance of understanding India’s semiconductor laws and regulations, which govern everything from fab licensing to OSAT arrangements.
To establish an OSAT capability, Indian companies can explore partnerships with established players like Samsung, TSMC, or GlobalFoundries. These firms have already set up significant manufacturing capacity in India and can offer expertise, equipment, and access to global markets.
However, the journey is not without its challenges. Securing government support and incentives for OSAT development is a critical aspect. Alok Choudhary, CEO at semiconductor design firm, Cadence India, emphasizes that “The Indian government needs to provide a level playing field and create an enabling environment that encourages innovation.”
Choudhary points out that India’s semiconductor ecosystem faces stiff competition from its neighbors, China and South Korea. To remain competitive, Indian companies must focus on developing their own IP (intellectual property) capabilities, rather than simply relying on licensing existing designs from global players.
Developing a skilled workforce is another critical aspect. As Indian companies move up the value chain, they will need engineers and technicians with expertise in areas like advanced packaging, testing, and design. Kunal Singh, associate vice president at engineering firm, Cognizant India, notes that “India needs to invest in education and training programs that focus on semiconductor technology.” This will enable Indian talent to compete globally.
The government has been taking steps to promote the development of a robust semiconductor ecosystem. The Prime Minister’s Office has launched initiatives like the National Semiconductor and Integrated Circuit Manufacturing Scheme (NSICS), which provides financial support for setting up fabs and promoting OSAT.
Additionally, the Indian Institute of Technology (IIT) has established a Centre for Innovation in Electronics & Communication Engineering (CIECE), which aims to promote research and development in emerging areas like semiconductor manufacturing.
As India’s semiconductor ambitions continue to grow, industry leaders are optimistic about the country’s prospects. By focusing on OSAT and leveraging its strengths in engineering and manufacturing, Indian companies can establish a foothold in the global ecosystem.
The back-end is where we can make an immediate impact," said Rajesh Singh. “We need to build our capabilities in OSAT before looking at fab-first.” India’s chip dream may not start with fabrication plants just yet, but by embracing the value chain and focusing on assembly, testing, and packaging, the country can lay a strong foundation for its long-term ambitions.
It’s all about taking small steps towards greatness," said Alok Choudhary. The Indian semiconductor industry is poised to take those first steps.