India's backend semiconductor manufacturers are benefiting from a narrow window of materials comfort that is closely tied to the use of legacy packaging technologies.
For now, OSAT players focused on simpler packages are largely insulated from the ultra-high-purity gas and specialty chemical constraints facing semiconductor fabs. Industry executives and analysts, however, warn that this advantage is structural and temporary.
Suchi Semicon, which is expanding capacity in legacy OSAT packages, said its current operations do not depend heavily on imported ultra-high-purity materials.
"For the types of packages we are doing, which are legacy packages, the gases required are easily available in India," said Shetal Mehta, Director at Suchi Semicon. "We are using nitrogen and argon. We do not see any shortfall there, and we do not see this as a bottleneck."
Because these gases are widely produced domestically, Suchi Semicon said it does not face meaningful operating cost premiums linked to import logistics, purity testing, or specialized storage. At this stage, backend manufacturing at the legacy level remains largely shielded from the supply-chain fragility that affects more advanced semiconductor processes.
That comfort, analysts say, is a function of low complexity rather than supply-chain readiness.
A comfort built on low complexity
"India's current ease in sourcing ultra-high-purity gases and packaging materials might feel reassuring, but it masks a deeper fragility," said Sanchit Vir Gogia, chief analyst at Greyhound Research. "What looks like comfort is largely the result of operating within legacy OSAT environments that run at modest throughput, low complexity, and relaxed reliability thresholds."
Gogia noted that such lines typically rely on basic industrial gases like nitrogen and argon at relatively low purity grades, and on prequalified imported packaging kits that place limited demands on local supply chains. That dynamic, he said, is already beginning to change.
"Once you move into advanced packaging, automotive-grade reliability, or chiplet integration, you are no longer managing supply volumes. You are managing molecular purity, batch-to-batch consistency, and audit-grade traceability," Gogia said. "The margin for error tightens dramatically, and yields become sensitive to even minor input drift."
According to Gogia, India's backend ecosystem is likely to encounter this transition sooner than many expect. He estimates that complexity pressures will begin surfacing around 2025, with volume-related stress becoming visible by 2026, as new lines move beyond initial bring-up into sustained customer delivery.
Fabs face the problem first
Gas suppliers say fabrication plants are already exposed to this challenge.
According to INOX Air Products, building certified ultra-high-purity gas capacity requires multi-hundred-million-dollar investments in advanced purification systems, high-precision metrology, and extensive redundancy, along with prolonged qualification cycles involving fabs and tool vendors.
"Impurity control is measured at parts-per-trillion levels," said Diganta Sarma, head of business development and strategy at INOX Air Products. "Beyond production, the port-to-fab journey is equally critical. Micro-leaks, moisture ingress, or vibration during transport can trigger costly yield excursions."
Sarma added that extended customs dwell times and non-segregated port storage significantly raise contamination risk, making logistics discipline as critical as plant-level purity controls.
To address these gaps, INOX Air Products is developing an Electronic and Specialty Gas Hub at Dholera with a planned investment of ₹500 crore. The facility is intended to support the semiconductor ecosystem emerging around Tata Electronics and will supply ultra-high-purity bulk and specialty gases, while also building capabilities in container management, quality assurance, compliance, redundancy planning, and last-mile delivery.
The hidden bottleneck: qualification
While material availability often dominates public discussion, Gogia argued that India's most underestimated constraint lies elsewhere.
"The most underrated barrier to India's backend ambitions is not capex or even purity. It is supplier qualification throughput," he said.
Every gas, chemical, substrate, and mold compound used in semiconductor packaging must pass a rigorous customer-led qualification process involving audits, documentation reviews, and long-term consistency testing. In mature ecosystems, these processes are institutionalized. In India, they are still forming.
"In practice, materials that appear available will not be usable," Gogia said. "Qualification cycles will stretch, validation backlogs will grow, and minor supplier changes can reset the clock entirely. As multiple backend facilities scale simultaneously, this becomes a structural throttle."
India's decentralized OSAT geography compounds the challenge. Unlike Taiwan, where fabs, gas plants, and packaging vendors operate in close proximity, India's facilities are spread across states, stretching logistics, traceability, and audit coordination.
Comfort with an expiry date
For now, legacy OSAT players remain protected by their position on the technology curve. But analysts warn that this insulation will erode as packaging complexity rises and customer expectations tighten.
"The illusion of comfort holds as long as complexity stays low," Gogia said. "Backend complexity is rising fast. Without a parallel upgrade in qualification infrastructure, logistics discipline, and supplier readiness, this comfort will evaporate."
India's backend expansion, he added, will ultimately be judged not by how much capacity it builds, but by how reliably it can qualify and sustain its material ecosystem.
Article edited by Jack Wu
