Synopsis
The ongoing West Asia conflict is beginning to cast a shadow on India’s semiconductor ambitions. Rising crude-linked costs and supply chain disruptions are expected to disproportionately impact outsourced semiconductor assembly and test (OSAT) players, industry experts said.Fabs, while energy-intensive, are likely to face primarily cost inflation rather than immediate operational disruptions, experts said. According to Devendranath AM, chief executive of Feedback Advisory, India’s upcoming semiconductor fabs are relatively insulated on the energy front, as they are not dependent on oil or natural gas. However, they remain exposed to global supply chains for critical materials and equipment, which could see delays and cost escalations due to logistics disruptions, particularly around the Strait of Hormuz.
A more acute risk for fabs is of helium supply, he said. The gas, a byproduct of liquefied natural gas production, is critical to semiconductor manufacturing and cannot be easily substituted. Disruptions in Qatar’s LNG output have already tightened global helium availability, pushing up prices sharply.
While India’s fabs are still under construction and not immediately affected, prolonged supply disruptions beyond 12-15 months could pose a significant risk to operations and ramp timelines, Devendranath said.
In contrast, OSAT players face a dual challenge of cost inflation and supply chain vulnerability. Ashwath Rao, senior analyst at Counterpoint Research, said crude price volatility was pushing up costs of petrochemical inputs such as epoxy, resins, and polymers: key materials used in semiconductor packaging. Given their structurally lower margins, OSAT firms are more sensitive to such input cost increases, he said.
Additionally, OSAT units are heavily dependent on imported materials such as helium from Qatar and bromine from Israel and Jordan, making them more exposed to logistics bottlenecks and freight cost spikes.
Disruptions in shipping routes and higher insurance costs are also increasing lead times, raising the risk of execution delays, Rao said. However, unlike fabs, OSAT facilities retain some flexibility to substitute helium with alternatives such as nitrogen, albeit with efficiency trade-offs.
Tata Semiconductor Manufacturing; Tata Semiconductor Assembly and Test; Micron, Kaynes Semicon, and CG Semi did not respond to ET's request for a comment.
Neil Shah, vice president at Counterpoint Technology Market Research, said supply disruptions are likely to persist for the next four to five months, coinciding with the planned pilot and early production phases of several Indian semiconductor projects.
“Since most Indian semiconductor manufacturing plants are slated to begin pilot, trial or mass production in Q2 or later, there will be some effect, especially from rising spot prices,” he said.
Shah added that companies such as Kaynes Technology and CG Power could face temporary cost pressures if they are unable to secure sufficient inventories over the next three to four months. However, he said the overall impact remains limited for now, as most facilities are not yet fully operational.
If disruptions persist beyond three to four months, the cumulative impact could begin to erode India’s cost competitiveness in the semiconductor value chain, experts said. OSAT delivery timelines may slip, while fabs could face delays in equipment imports and project execution, they said.
The situation also highlighted a broader structural gap. “This is a call for Indian policymakers to continue building a local raw materials ecosystem along with fab development to ensure long-term self-sufficiency and competitiveness,” Shah said.
For now, India’s semiconductor projects remain relatively shielded from immediate shocks, but the evolving geopolitical situation pointed to the sector’s continued dependence on global supply chains and the risks that come with it.
