Growing Interest in India’s OSAT Sector from German and US Companies

German and US semiconductor companies, including Infineon and Onsemi, are exploring opportunities to establish OSAT facilities in India. Infineon has partnered with CDIL Semiconductors to supply semiconductor wafers, while Onsemi seeks to leverage local investments for its operations. Industry experts emphasize the importance of data-driven decision-making in the India Semiconductor Mission to support growth in this sector.

Recent developments indicate growing interest from German and American firms in India’s Outsourced Semiconductor Assembly and Test (OSAT) sector. Notable companies including Tata Group, CG Power, and Kaynes Technology are establishing substantial OSAT facilities across the country, with Tata’s unit in Assam valued at Rs 27,120 crore, CG Power’s unit at Rs 7,584 crore, and Kaynes Technology’s project in Gujarat at Rs 3,307 crore.

Infineon, a leading German semiconductor company, is currently exploring the possibility of establishing an OSAT presence in India. Following a recent partnership with CDIL Semiconductors, Infineon is set to supply bare semiconductor wafers for power chipsets. “Their (Infineon’s) partnership with CDIL could also be viewed as a move towards (setting up an OSAT in India),” remarked an industry insider.

Simultaneously, Onsemi, formerly known as ON Semiconductor Corporation, is expressing a strong interest in the Indian market. An industry source stated, “Onsemi is very keen on an OSAT presence in India. They see it as a way to leverage their brand name and have the Indian partner put in the money for the facility while they provide technical expertise. It becomes a win-win that way.”

Infineon reported significant financial strength, with approximately $15 billion in revenue for the fiscal year 2024. The company emphasized in its shareholder letter that, despite current market weaknesses, the structural demand for semiconductors is on the rise, necessitating proactive steps to secure competitive manufacturing capabilities for the future.

In contrast, Onsemi is navigating difficult waters, having announced layoffs for around 2,400 employees globally due to restructuring efforts. The company is also working on diversifying its revenue streams by bidding to acquire Allegro MicroSystems for $6.9 billion, amidst a significant revenue drop from $8.2 billion to $7 billion in the past year.

Experts in the semiconductor industry argue that the India Semiconductor Mission (ISM) requires a data-driven approach to determine the number of OSAT facilities eligible for financial support. The first phase of ISM provided a 50% subsidy on capital expenditure for OSAT units, with some states offering additional incentives. Analyst Arun Mampazhy noted the importance of assessing whether Indian OSATs can secure adequate orders for consistent activity, and he suggests prioritizing investments in high-volume silicon fabs over OSATs in the next phase of ISM policy.

In conclusion, the burgeoning interest of major semiconductor companies like Infineon and Onsemi in establishing OSAT facilities in India highlights the country’s potential as a significant player in the global semiconductor industry. As these companies navigate challenges and pursue partnerships, the structured support from the India Semiconductor Mission will be crucial in determining the success of these initiatives. Strategic decisions on subsidy allocation and facility development will play a pivotal role in shaping India’s semiconductor landscape.

Original Source: m.economictimes.com