Can small players survive India’s big semiconductor packaging push?

As India accelerates its semiconductor ambitions, the spotlight is on billion-dollar commitments from giants like Tata Electronics and Murugappa Group’s CG Power. At the heart of this industrial shift lies OSAT—Outsourced Semiconductor Assembly and Testing—a segment vital to the back-end of chip manufacturing. But while large players are setting up expansive facilities with government backing, the question lingers: is there a viable future for smaller companies in India’s OSAT ecosystem?  

India’s OSAT Drive: Opportunities and Challenges for SMEs 

India's semiconductor journey is entering a new phase, with major conglomerates making significant investments in OSAT facilities. These back-end processes are essential to chip production and are now part of the government’s ₹76,000 crore semiconductor mission. As large OSAT plants begin to materialise in various states, questions arise about the space left for smaller companies in this capital-heavy sector.   

Kathir Thandavarayan, Partner at Deloitte India, believes that India's OSAT ecosystem is poised for rapid growth, he said, "India’s OSAT ecosystem is currently in its nascent stage but is expected to witness exponential growth over the next five years, driven by large-scale investments enabled by the semiconductor schemes of the Government of India. Indian companies are forging partnerships with leading global players to bring advanced OSAT technologies into the country, with cumulative investments already exceeding $5 billion."   

Global OSAT Landscape: A Consolidated Market   

Worldwide, the OSAT industry is highly consolidated. Just five firms, ASE (Taiwan), Amkor (US), JCET (China), Powertech, and KYEC, control over 80% of the global market. Their operations are optimised for high-volume, low-margin services with advanced packaging capabilities. India, by contrast, is a late entrant. Its only legacy OSAT firm, SPEL Semiconductor, has operated at a much smaller scale, and new entrants face a steep learning curve and funding barriers.

Market Dynamics and Growth Projections   

According to a 2024–2029 report by Research and Markets, the Indian semiconductor market is being significantly boosted by the local startup ecosystem and innovation, with key investments from telecom giants like Reliance Jio and Bharti Airtel accelerating momentum across the value chain. On a global scale, the OSAT services market is projected to reach $77.90 billion by 2032, with demand being fueled by rising circuit complexity and the proliferation of Artificial Intelligence (AI) and 5G-enabled devices, as highlighted by a report from S&S Insider. These insights underscore both the opportunities and the competitive landscape shaping India’s ambitions in semiconductor packaging.   

Capital and Scale: Major Hurdles for Smaller Firms   

For MSMEs and startups in India, entry into OSAT is constrained by high initial capital requirements. Industry estimates suggest even a minimal packaging unit can require ₹50–100 crore in investment. Access to critical equipment, materials, and skilled labor adds to the cost. Moreover, most government incentives under the semiconductor mission have so far favored large-scale, integrated proposals, leaving smaller players struggling to find viable entry points.   

Thandavarayan elaborates on these challenges, particularly for smaller firms, "There are three areas of challenges for smaller companies and startups in the semiconductor ecosystem: technology access, R&D, and trained talent. Startups and SMEs struggle to access and keep up with rapidly evolving semiconductor technologies. Startups may lack the resources to invest in research and development, which can restrict their ability to develop new solutions or improve processes. There is also a shortage of trained talent with semiconductor assembly and testing processes, which impacts the ability of smaller companies and startups to leverage the evolving ecosystem."

Rising Momentum Among Smaller Indian OSAT Players 

While the landscape remains challenging, a few smaller Indian companies have begun making strategic inroads into the OSAT segment. In August 2023, Surat-based Suchi Semicon, a former textile exporter, announced a $100 million investment to build an OSAT facility with plans to start operations by end-2024. Kaynes SemiCon, part of Kaynes Technology, reported in November 2023 that it had secured its first OSAT customer—Lightspeed Photonics—and is targeting rollout by mid-2024, focusing on advanced 2.5D/3D packaging. Bhiwadi-based Sahasra Semiconductors, among the first beneficiaries of India’s PLI and SPECS schemes, started small-scale NAND flash packaging in early 2023. Chennai’s iVP Semi, announced plans in October 2023 to build a testing unit targeting EV and power electronics segments. These developments reflect a gradual expansion of smaller firms into niche OSAT areas, amid ongoing ecosystem challenges. 

Niche Opportunities in a Dominated Market   

Despite the odds, there are niches within OSAT where smaller firms could play a role, such as in chiplets, power electronics, or packaging for defense and automotive use cases. Countries like Malaysia have built ecosystems where SMEs support or complement large OSATs through specialised services. In India, startups with strengths in design, embedded systems, or IP could apply similar models if supported by a broader ecosystem.   

Thandavarayan offers an optimistic view of smaller firms’ potential in the broader supply chain, "While OSAT operations can be capital-intensive for SMEs, participating in the broader supply chain ecosystem remains a viable opportunity. OSAT facilities depend on a wide range of input materials, including specialty chemicals, bulk gases, lead frames, encapsulation compounds, and bonding materials. SMEs with core competencies in these areas can position themselves strategically to benefit from the growing investments in India’s semiconductor sector and scale their operations more rapidly."   

Future Depends on Ecosystem Design   

The next few years will determine whether India’s OSAT strategy is inclusive or top-heavy. Smaller firms need access to shared infrastructure, favorable procurement policies, and tailored financial support. Without these, they risk being edged out of a sector seen as vital to national tech sovereignty.   

India has a unique chance to build an OSAT model that includes both giants and agile innovators. Whether it succeeds will depend on deliberate ecosystem engineering, and how well the country can balance ambition with accessibility.