Can Suchi Semicon Build India’s First Homegrown OSAT Giant?

India’s dream to be a major player in the global semiconductor landscape needs more funds to come true. 

Since the limited funding from venture capital firms and government subsidies is far from being enough to power this growth, the need for capital infusion from deep-pocket private equities, solvent industrialists, and rich family funds has come to the fore. More conglomerates and manufacturing companies too need to chip in to foster the ecosystem for setting up elements like supply chains, wafers, and talent pools that are integral to its development. 

It’s been slow, yet the ball has started rolling. 

From giants like Tata Technologies to four-decade-old listed integrated electronics manufacturer Kaynes Technologies, corporates have begun zooming in on the feverish pace of growth of the $33 Bn chip market in India, which is estimated to scale to $150 Bn by 2030, according to an Inc42 estimate. 

Gujarat-based Suchi Semicon makes one such example. Ashok Mehta’s rolling out of Suchi Semicon shows an unusual brand extension from textiles to semiconductors.  

If the trigger was the rapid growth of the industry across the world, then government support paved the way for driving corporate funds into the semiconductor space. As part of its INR 76,000 Cr India Semiconductor Mission, the government has been backing fabrication plants, outsourced semiconductor assembly and testing (OSAT) units, and display facilities through subsidies on land and various other components to boost chip manufacturing. 

Riding on the wave, Indian conglomerates like Murugappa Group and Kaynes Technologies decided to set up OSAT facilities in Gujarat, while international giants like Micron turned up to build fabrication plants in the country with government support.

Mehta joined the league with his son Shetal at the helm by incorporating Suchi Semicon in 2023 with an OSAT facility. The company has decided to invest INR 840 Cr (about $100 Mn) with only a 20% subsidy from the Gujarat government.

Warps ’N’ Wefts To Wafers: How Suchi Weaved Its Chip Dreams 

While a severe disruption in the semiconductor supply chain back in 2021 left most industries on edge, it also unleashed huge possibilities for Indian companies in manufacturing semiconductors.  

While narrating the journey from textiles to semiconductors, Mehta recounted how Prime Minister Narendra Modi’s words had inspired him. “Modiji said, ‘Aapda ne avsar ma badlo (make problems your opportunities), when the world was grappling with the supply chain disruptions,” he told Inc42.  

Rolled out in 2004, Suchi Industries had become one of the biggest embroidery manufacturing companies in the country by then, and was selected for the PLI scheme in 2022. By running a successful business for nearly two decades, Mehta had developed connections with markets in various overseas geographies while also gathering insight into the import-export markets.

He could soon connect to a network in Malaysia, which is the hub of OSAT plants by top companies like Infineon, OnSemi, and Motorola. And, there was no looking back. 

In 2023, Suchi Semicon started building the factory in Surat and hired the entire technical team from Malaysia. The plant was opened last December after the entire infrastructure was in place, but importing equipment on time continued to be a challenge. The company expects to start commercial production by March this year, once the equipment delivery is completed.

OSATs are third-party vendors providing assembly, packaging, and specialised testing of integrated circuits (ICs). They source wafers from the fabs and execute the designs as asked by the chip-designing companies. In the case of Suchi, its direct customers are the printed circuit board (PCB) manufacturers and the designs are suggested by them.

Suchi Semicon has partnered with a Philippines-based company for technical support, which helps it procure the equipment and other raw materials. “India’s electronics manufacturing industry is completely dependent on imports today. It’s time to make a change,” Mehta said.

Cracking The Funding Fallacy: What Makes Suchi So Confident?

Mehta said that one of the major aspects in favour of Suchi Semicon has been its low dependence on government subsidies. In fact, unlike most companies that are setting up fabs or OSAT factories in the country, Suchi Semicon chose not to depend on land allocation by the government as Mehta owned large tracts of land in the state.

Even though the company has applied for the Centre’s incentive under the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), Suchi Semicon hasn’t held up its production plans for the approval.

According to Mehta, equipment cost claims the lion’s share in the cost of setting up an OSAT facility. “The Gujarat government’s 20% subsidy on building the plant infrastructure and machinery has helped us to a certain extent,” he said. 

While the major part of the funding came from Suchi Industries, Suchi Semicon also secured some credit facilities from Punjab National Bank.

Right Way To Chip In: Why Suchi Chose OSAT For Semiconductor Foray

Suchi Semicon could have entered the semiconductor space with any other business such as wafers or fabs, but it chose OSAT because, according to Mehta, this is the easiest way to begin as the broader ecosystem is yet to mature.

For instance, a fab requires a proper supply chain of various raw materials and chemicals, and India is still a few years away from building that, he said.

Suchi plans to start with assembling and testing basic small outline integrated circuit (SOIC) chips for consumer electronics such as televisions, computers, and air conditioners. In its next phase of expansion, the company will also start producing the TO-Leadless (TOLL) package used in automobiles. Infineon’s OptiMOS is one of the leading chips in this segment.

Along the way, Such will find Kaynes Semicon as its competitor in the automotive and other sectors. For the start, Keynes also has plans to supply chips to the power market.

With a capacity of producing 1.5 Lakh chips per day, Suchi Semicon has an order volume of the same capacity from one customer in the US. Mehta sees a huge gap in the market that Suchi can bridge. Its US customer, for instance, is a major player in a market that picks up 1 Mn chips a day from OSAT vendors across the world. 

As it scales further, the company aims to cater to more customers both within and outside India. The US is its biggest target market for the moment.

Suchi has also created a strong team of researchers from the IITs and NITs while it is also collaborating with several colleges and universities to train students there for hiring in the coming years.

Designing The Blueprint: How Suchi Plans To Scale The Business 

Suchi Semicon sees OSAT as its stepping stone to enter a market accelerating at 24% every year, driven by more than 100 startups that have grown over 2.4 times since 2014. To lead the race in the simmering Indian semiconductor manufacturing space, the company is setting up its in-house chip design entity, Suchi Logic, which is likely to start work in the next three months. It plans to use its own designs to make its chips market-ready as it expands the business.

On the OSAT front, the company also plans to start making quad flat no-lead (QFN) and dual flat no-lead (DFN) packages that are used for connecting integrated circuits with the printed circuit boards in mobile devices and automotive electronics.

In the next three years, Suchi Semicon aims at a production capacity of 3 Mn chips a day, catering to at least 10 customers. From 80 employees at present, the company plans to beef up its workforce to 1,000 in this period.

“Global players have their sharp eyes on India. Once two to three factories become operational, at least 40 to 50 factories will be set up in the country by international companies in the next five to 10 years,” Mehta said.

A Japanese company is also in talks with Suchi Semicon to set up a factory in India under a joint venture.

With 20% of the integrated circuit (IC) design workforce around the world coming from India and the government adding fresh thrust towards a robust ecosystem, the industry is expected to see the country zoom in on the $1 Tn market opportunity expected to be unleashed by 2030. It remains to be seen how Suchi Semicon and its domestic peers help India stay the course to reach a leading position in the global semiconductor market.

[Edited By Kumar Chatterjee]