India’s Chip Dream Starts at the Back End, Not the Foundry F…

India’s semiconductor ambitions are growing, but the path forward may not involve billion-dollar fabrication plants, just yet. While policymakers often publicise fabs as the ultimate prize, industry leaders argue that the country’s most pragmatic entry point is elsewhere. 

Assembly, testing, and packaging (ATMP) is a step in the value chain, better known globally as outsourced semiconductor assembly and test (OSAT). It offers India an opening to establish its niche in the global ecosystem.

Instead of rushing into full-scale fabrication, a goal many experts say remains years away, executives point to back-end manufacturing as the natural first step. “The natural evolution for most companies has been, first, can I look at localisation of the back end, the OSAT piece?” said Manish Kothari, senior vice-president for software development at Silicon Labs India, in an exclusive conversation. 

“The foundry is harder, and it can happen if our current foundry partners build the capability in India. For us, the more likely step would be to look at the back end before we look at the front end.”

Kothari’s view is echoed by Vivek Tyagi, managing director & country manager at Analog Devices India, who stresses that both global reliance and localised production will be essential if India is to compete in semiconductors.

The Fab Question

Despite MOUs and government subsidies, none of the companies are betting on immediate fabrication. “You have to measure that in decades. It will take 10 to 20 years for the front-end piece,” Kothari said, adding that a viable OSAT ecosystem could emerge within the next five years. 

“OSAT facilities are significantly less complex, less capital-intensive, and much faster to implement than building a silicon wafer fab. Fabs require billions of dollars and take years to be operational,” described Parv Sharma, senior analyst at Counterpoint Research. 

Tyagi confirmed that Analog Devices would wait for local fabs to mature. “Tata’s fab is not yet ready. Once your fab is ready, we are willing to qualify some of our technology in that fab, and start to utilise that fab,” he said.

Raghu Panicker, CEO of Kaynes SemiCon, meanwhile, stressed that Kaynes’ pilot chip was not about beating rivals but about building an ecosystem. “Whether it is CG, Kaynes, Micron, or somebody else, all are India’s projects. It is absolutely not a race… the name of the game is collaboration,” he said.

Kaynes SemiCon is set to roll out its first pilot chip through its OSAT facility in Sanand, Gujarat. 

Sharma added that Taiwan is the leader when it comes to OSAT players and has the largest share of the global OSAT market. “China also has a significant market share. The US is big in chip design but low in domestic OSAT volume. Whereas India is at nascent stage for OSAT market with key investment from Kaynes and Micron,” he said, emphasising that India’s overall OSAT capacity is small compared to global players.

But what is India’s advantage? 

It lies in the low-cost engineering talent and a lower overall labour base compared to Taiwan and the US, Sharma said, adding that being positioned as an alternative for diversification amongst current geopolitics has played in the country’s favour.

India’s 1st OSAT Chip

Kaynes SemiCon will come up with its first pilot sample by the first week of October. Customer audits are scheduled for the following week. This rapid progress provides a concrete example of India building near-term credibility through OSAT.

The company is building a $450 million OSAT project, with an additional $150 million earmarked for expansion and $15 million for R&D. “We have hired 17 PhDs from across the world and the CTO is coming from Singapore,” Panicker said. 

Kaynes also recently announced a joint venture with California-based UST to set up a ₹3,330 crore semiconductor manufacturing facility in Sanand, Gujarat focusing on OSAT operations.

In September, the company also entered into a partnership with Emerson to deploy their NI Semiconductor Test System (STS) as its preferred platform across its facilities in India. The platform will standardise testing of analogue, mixed-signal, RF, power and MEMS devices, helping to accelerate production and cut time-to-market. 

The project already counts Alpha Omega Semiconductor, L&T Semiconductor Technology, Fujitsu, and Infineon among its signed customers. Panicker confirmed the firm works closely with technology partners such as AOI Electronics, SEALSQ, and the Institute of Micro Electronics in Singapore. 

Kaynes is already securing international business. Panicker stressed that the company is also creating a reliability and failure analysis lab, a package design unit, and “bumping as a service, which is one of a kind because nobody else is planning to do that.”

This push is backed by government attention, Panicker said, adding that ministries are monitoring their OSAT progress closely. 

Talent Before Tech

Beyond facilities, the question of skilled manpower looms large. It takes about six to 12 months to turn Indian talent to be productive, said Kothari. Silicon Labs partners with IIT Delhi for advanced programmes and funds IoT centres across campuses to bridge this gap. 

“There is a shortage of skilled engineers in the physical, hands-on aspects of the manufacturing floor, including cleanroom operations, yield analysis, equipment calibration, and maintenance of highly specialised tools,” Sharma said.

For the future of OSAT, India must build expertise in 2.5D/3D packaging, chiplets, and co-packaged optics (CPO), specialised skills that demand deep knowledge and years of experience.

Government schemes like the Production Linked Incentive (PLI) also drive demand by encouraging electronic manufacturing. 

Kothari said that India needs to emphasise on inculcating real application into education, which is otherwise limited to the academics and practicals.This foundation could ultimately support the long-term goal of full-scale fabrication, wherein India seeks to become a sizable player in the global manufacturing supply chain.

The post India’s Chip Dream Starts at the Back End, Not the Foundry Front appeared first on Analytics India Magazine.

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