Future of OSAT in India: Unleashing the Potential of Semiconductor Ecosystem

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Introduction

The Indian semiconductor industry is poised for remarkable growth, with the market expected to reach US$ 55 billion by 2026. This vibrant sector, encompassing smartphones, wearables, automotive components, and data storage, holds immense promise for India's economic development. As the industry expands, the role of Outsourced Semiconductor Assembly and Test (OSAT) and Advanced Packaging and Test Manufacturing (ATMP) becomes increasingly critical. However, recent developments have posed challenges to the progress of the semiconductor ecosystem in India. This article explores the future of OSAT in India, the significance of ATMP, and how India can leverage the potential of this industry.

The global Outsourced Semiconductor Assembly and Test Services (OSAT) market is experiencing remarkable growth in the era of technological advancements. With a projected market size of USD 76.23 billion by 2028, growing at a CAGR of 8.07% during the forecast period (2023-2028), OSAT is playing a pivotal role in the rapidly expanding semiconductor industry. This article explores the contemporary landscape of OSAT and highlights the factors driving its growth in the face of ongoing technological transformations.

Thriving Semiconductor Industry and its Impact

• ??Outsourcing as a Catalyst for Semiconductor Industry

Outsourcing has become a critical aspect of the semiconductor industry, particularly in the manufacturing phase of product development. Companies increasingly rely on external vendors for their manufacturing needs. Two significant examples of semiconductor outsourcing are Pure-Play Foundries (FABs) and OSATs. OSATs provide essential services for final assembly and testing, ensuring the quality and efficiency of semiconductors.

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• ?Advancements in Packaging Platforms and Collaborations

The commercialization of advanced applications like Artificial Intelligence (AI) and 5G is driving the need for innovative packaging platforms. Technologies such as fan-out packaging and 3D flip chip are gaining prominence due to their ability to address high-power consumption and enhance chip connectivity. In response, many companies are collaborating with OSAT vendors. Key OSAT players, including ASE/SPIL, Amkor, and JCET, are investing in advanced System-in-Package (SiP) and fan-out technologies to stay competitive in the market.

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• ?The Impact of COVID-19 and Resilience

The outbreak of the COVID-19 pandemic in 2020 caused significant disruptions to the global supply chain and production. The semiconductor industry, including OSAT services, faced challenges due to labor shortages, leading to reduced or suspended operations in packaging and testing plants. This created bottlenecks for companies reliant on back-end packages and testing capacity. However, the industry has demonstrated resilience and adaptability, adjusting to the changing landscape and ensuring the continuous supply of semiconductors to meet growing demands

OSAT Market Analysis

The Outsourced Semiconductor Assembly and Test Services (OSAT) Market size is estimated at USD 51.71 billion in 2023, and is expected to reach USD 76.23 billion by 2028, growing at a CAGR of 8.07% during the forecast period (2023-2028).

·??????The semiconductor industry has been growing, with miniaturization and efficiency being the focus areas and the semiconductors emerging as building blocks of all modern technology. The advancements and innovations in this field have directly impacted all downstream technologies.

·??????According to the Semiconductor Industry Association (SIA), global semiconductor industry sales were USD 43.6 billion in May 2021, an increase of 26.2% over May 2020, a total of USD 4.6 billion, and 4.1% more than the April 2021 total of USD 41.9 billion. Furthermore, the sales of semiconductors in April 2021 witnessed an increase of 1.9% from March 2021 at USD 41.0 billion and an increase of 21.7% compared to April 2020 at USD 34.4 billion.

·??????The semiconductor industry is also highly driven by outsourcing. More than designing, the manufacturing aspect of semiconductor product development relies on the services provided by external vendors. The two significant examples of semiconductor outsourcing are FABs (Pure-Play Foundries) and OSATs.

·??????The rising commercialization of applications like AI and 5G is also fueling advancements in packaging platforms, like fan-out packaging and the 3D flip chip technology, to address the high-power consumption need and provide benefits such as greater chip connectivity. This forces many companies to collaborate with OSAT vendors; hence, many OSATs, such as ASE/SPIL, Amkor, and JCET, invest in various advanced SiPs and fan-out technology to gauge their competition.

·??????The outbreak of COVID-19 globally significantly disrupted the supply chain and production of the studied market in the initial phase of 2020. For circuits and chipmakers, the impact was more severe. Due to labor shortages, many packages and testing plants in the Asian-Pacific region reduced or even suspended operations. This also created a bottleneck for companies that depend on such back-end packages and testing capacity.

?Glimpses of India's Semiconductor Landscape

?India's semiconductor industry plays a pivotal role in the global market. It currently represents 1% of international semiconductor trade and 0.5% of global semiconductor sales, contributing around US$ 2.3 trillion to the global GDP. Notably, India is a leading chip designer, with over 30,000 experts working in this field. The Indian semiconductor design market was valued at over US$ 33 billion in 2020, and it is projected to grow at a CAGR of 29.4% between 2015 and 2020, reaching US$ 52.6 billion. Furthermore, India's semiconductor market was worth US$ 15 billion in 2020 and is estimated to reach US$ 27 billion in 2022.

?The Importance of OSAT and ATMP

?OSAT and ATMP are vital segments within the semiconductor industry. OSAT refers to the outsourcing of final assembly and testing processes to specialized service providers, ensuring the quality, reliability, and cost-effectiveness of semiconductors. On the other hand, ATMP focuses on advanced packaging and testing manufacturing, encompassing innovative packaging technologies and efficient testing methodologies. Together, OSAT and ATMP enable fabless semiconductor companies to concentrate on design and innovation while relying on specialized service providers for the crucial stages of production.

Leveraging the Potential: India's Path to OSAT

?India can leverage the potential of the semiconductor ecosystem by implementing strategic initiatives:

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1. Strengthening Infrastructure: Developing state-of-the-art semiconductor packaging and testing facilities equipped with advanced equipment and technologies will attract global players and bolster domestic OSAT capabilities.

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2. Skill Development: Investing in skill development programs and establishing specialized training centers will nurture a highly skilled workforce to support the growth of OSAT in India.

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3. Collaboration and Partnerships: Fostering collaboration between domestic and international players, as well as attracting global technology partners, will facilitate knowledge transfer, technology infusion, and market expansion.

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Learning from Other Countries' Success Stories

Several countries have successfully developed their OSAT capabilities and semiconductor ecosystems. For instance:

Taiwan: Taiwan's semiconductor industry has flourished through strong government support, infrastructure development, and collaboration between academia, industry, and research institutes. The country's robust OSAT capabilities have made it a global leader in semiconductor manufacturing.

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South Korea: South Korea's semiconductor industry has seen significant growth through investments in research and development, fostering a skilled workforce, and establishing strategic partnerships with international companies. The government's proactive policies have played a crucial role in creating a favorable environment for semiconductor development.

?Conclusion

The future of OSAT in India holds immense potential, given the projected growth of the semiconductor industry. By addressing challenges, such as the acquisition of technology partners and equity participation requirements, India can move closer

India's aspirations to become a global semiconductor manufacturing hub rely significantly on the progress of its OSAT industry. While recent developments have posed challenges, the country's immense potential remains intact. By focusing on infrastructure development, skill enhancement, government support, and research and development, India can position itself as a key player in the OSAT ecosystem. Leveraging the ongoing semiconductor wave and attracting global technology partners will be crucial in realizing India's ambitions and creating a self-reliant semiconductor ecosystem.

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References:

?1.)???"India's Semiconductor Design Market Valued at Over USD 33 Bn in 2020." Electronics Bazaar, 22 Oct. 2020, www.electronicsb2b.com/headlines/indias-semiconductor-design-market-valued-at-over-usd-33-bn-in-2020/.

2.)???"Outsourced Semiconductor Assembly and Test Services (OSAT) Market Size, Share & Trends Analysis Report By Service (Assembly & Packaging, Testing), By Application (Consumer Electronics, Automotive), And Segment Forecasts, 2021-2028." Grand View Research, 2021, www.grandviewresearch.com/industry-analysis/outsourced-semiconductor-assembly-test-services-market.

3.)???"Semiconductor Industry Sales Rise 26.2% Year-to-Year in May." Semiconductor Industry Association, 5 Jul. 2021, www.semiconductors.org/semiconductor-industry-sales-rise-26-2-year-to-year-in-may/.

4.)???"The Impact of COVID-19 on the Semiconductor Industry." McKinsey & Company, May 2021, www.mckinsey.com/business-functions/mckinsey-digital/our-insights/the-impact-of-covid-19-on-the-semiconductor-industry.