West Asia Conflict Threatens Delays for India's Semiconductor Projects

The West Asia conflict could delay India's semiconductor projects owing to logistical bottlenecks that have squeezed the supply of speciality gases, chemicals and metals, said people aware of the matter. These include the Tata Electronics fab in Dholera as well as assembly and test facilities being set up by the Tata company, CG Semi and Micron and others.

“The Indian semiconductor projects are likely to face delays on account of war and significant cost overrun due to effects of supply chain disruptions," said one of the persons cited. “The Tata Electronics fab in particular is expected to be hit the worst owing to the sheer size and scale of the project but the impact is being felt with other OSAT (outsourced semiconductor assembly and test) projects as well. Tata Electronics was airlifting materials but that is not viable in the long run because it cannot cater to the large volumes needed for such a project and is prohibitively expensive.”

Tata Electronics, CG Semi and Micron didn’t respond to queries.

Others said disruptions have eased and timelines may not be overly extended.

“Tata Electronics had a strong business continuity plan which came into play, and alternate sourcing was established to mitigate the effects of the supply chain disruptions,” said one of the persons.

Production delays

“The government was also very helpful through that period, and now things have stabilised. No significant delays to the timelines are expected due to the conflict.”

Experts, however, said war-related shipping disruptions have restricted materials and equipment supply chains required for greenfield fab and OSAT construction. They said schedules have gone awry and pilot and mass production timelines have been pushed by six to 12 months.

“India shares its portion of impact across material, equipment supply disruptions for both construction and operations phases of fab and OSAT, along with enhanced capex and opex costs due to energy spot price peaks,” said Danish Faruqui, CEO of Fab Economics, a US-based semiconductor greenfield project advisory, and co-chair of the Global Semiconductor Policy Council (GSPC).

As per GSPC data, the cost of energy has soared by a high double-digit percentage, leading to costlier semiconductor fab and OSAT construction.

Concentration in certain pockets

Some of the key inputs under threat include helium, bromine, sulphur, copper, aluminium and tungsten. Also on this list are materials such as photoresist, top anti-reflective coating (TARC) and bottom anti-reflective coating (BARC), slurries and clean chemistries. These are employed in the facilitation and operation phases of fab and OSATs.

Many of these materials are concentrated in certain pockets, Faruqui said.

For instance, Qatar supplies over a third of global helium. Similarly, two-thirds of global bromine production originates in Israel and Jordan.

To bypass maritime blockades stemming from the conflict, Faruqui said semiconductor companies and industrial gas suppliers scrambled to secure alternative pathways, relying on emergency airlifts and overland trucking routes.

“Airlifting is entirely unsustainable in the long run, operating as a costly, low-volume ‘band-aid’ that fails to meet the continuous, massive material demands of a modern semiconductor manufacturing plant,” Faruqi said. “Airlifting heavy industrial gases is financially draining. To transport liquid helium, it must be loaded into massive, double-walled, vacuum-insulated ISO-containers that weigh up to 30 tonnes and air freight is 10x higher per shipment as compared to ocean freight.”

Carriers enforce strict safety limits on the volume of pressurised, cryogenic materials allowed on a single plane, legally preventing companies from scaling up air supply chains.