West Asia Conflict Raises Supply Chain Risks for India’s Semiconductor Push, OSAT Players Most Impacted

The ongoing West Asia conflict is beginning to cast a shadow over India’s semiconductor ambitions, with rising crude-linked costs and supply chain disruptions posing challenges, particularly for outsourced semiconductor assembly and test (OSAT) players, industry experts said.

While semiconductor fabs are energy-intensive, they are expected to face primarily cost inflation rather than immediate operational disruptions. According to Devendranath AM, chief executive of Feedback Advisory, India’s upcoming semiconductor fabs remain relatively insulated from direct energy risks as they are not heavily reliant on oil or natural gas. However, their dependence on global supply chains for critical materials and equipment leaves them vulnerable to delays and cost increases, particularly due to logistics disruptions around the Strait of Hormuz.

A more pressing concern for fabs is the supply of helium, a crucial gas used in semiconductor manufacturing that cannot be easily replaced. Disruptions in LNG production in Qatar have already tightened global helium supply, driving prices upward. While India’s fabs are still under development and not immediately affected, prolonged disruptions lasting beyond 12–15 months could significantly impact operational timelines and project ramp-ups.

In contrast, OSAT players face a dual challenge of rising costs and supply chain vulnerability. Ashwath Rao, senior analyst at Counterpoint Research, noted that crude price volatility is increasing the cost of petrochemical inputs such as epoxy, resins, and polymers—key materials used in semiconductor packaging. Given their relatively lower margins, OSAT firms are particularly sensitive to such cost escalations.

Additionally, OSAT units rely heavily on imported materials, including helium from Qatar and bromine from Israel and Jordan, making them more exposed to logistics bottlenecks and rising freight costs. Disruptions in shipping routes, coupled with higher insurance premiums, are extending lead times and increasing the risk of execution delays.

Neil Shah, vice president at Counterpoint Technology Market Research, said supply disruptions could persist for the next four to five months, coinciding with the pilot and early production phases of several semiconductor projects in India.

He added that companies such as Kaynes Technology and CG Power may face short-term cost pressures if they are unable to secure sufficient inventory over the next few months. However, the overall impact remains limited for now, as most facilities are yet to reach full operational capacity.

If disruptions continue beyond the near term, India’s cost competitiveness in the semiconductor value chain could be affected. OSAT delivery timelines may slip, while fabs could encounter delays in equipment imports and project execution.

The situation also underscores a broader structural challenge. Experts believe it highlights the need for India to build a robust domestic raw materials ecosystem alongside fab development to ensure long-term resilience and competitiveness.

For now, India’s semiconductor projects remain relatively shielded from immediate shocks, but the evolving geopolitical scenario reinforces the sector’s dependence on global supply chains and the risks associated with it.