Global outsourced semiconductor assembly and test (OSAT) companies, mostly headquartered in Taiwan, are considering locations in Asian countries like Malaysia’s Penang, the Philippines, and Vietnam to mitigate geopolitical risks. Indian firms are facing tough competition in attracting these OSAT majors due to concerns about India’s ability to provide a stable, predictable, and lasting policy environment, which is crucial for making decisions in a capital-intensive business. OSAT firms provide assembly and testing services to various players in the semiconductor industry.
Global automotive majors and other clients have urged their OSAT partners to explore alternative locations to reduce supply chain disruptions caused by geopolitical tensions between the US and China, and between China and Taiwan. To mitigate the risk, they recommend a “China” and “Taiwanese” strategy that involves building capacity in other Asian countries and the US.
India, which is offering OSAT firms an upfront 50% subsidy in the cost of setting up a plant under the government’s semiconductor scheme, could be an attractive destination. However, global OSAT majors are seeking assurance that their policy concerns are addressed. Semiconductor fab companies have raised concerns about the need for stability and predictability in Indian policies over a long period of time, given the capital-intensive nature of these plants. A senior executive of a leading chip company, which had discussed shifting to India with leading OSAT players, said that “While there is awareness of opportunities in India, there are concerns about the ecosystem and ease of doing business in India that need to be addressed…The engagement between the OSAT companies to understand the incentives and the big picture has not been high,” the person added.
