India stakes ₹1.64 lakh crore on semiconductors, misses the supply chain beneath the fabs

India committed ₹1.64 lakh crore in semiconductor investment across assembly, test, and packaging facilities, former NITI Aayog CEO Amitabh Kant confirmed last week. The capital represents the largest industrial sector bet New Delhi has placed since production-linked incentive schemes began in 2020. Three OSAT plants are under construction. None have operational supply chains behind them.

Kant's remarks arrived days after industry executives privately circulated memos on ancillary infrastructure deficits. India has attracted OSAT capacity—outsourced semiconductor assembly and test—but lacks the substrate suppliers, chemical precursor manufacturers, and precision logistics networks those plants require. The country builds the factories. It does not yet build what feeds the factories. One executive at a Taiwanese OSAT joint venture estimated India's chemical supply readiness at 18 months behind the first production line's scheduled start.

This matters because OSAT is the entry wedge, not the end state. Assembly and test facilities require lower capital intensity and shorter build cycles than front-end fabs. They also require mature ancillary ecosystems: ultra-pure water treatment, specialty gas suppliers, cleanroom component vendors, and temperature-controlled logistics within 50 kilometers. India has committed the ₹1.64 lakh crore but has not yet committed comparable policy support to the Tier 2 and Tier 3 suppliers that make OSAT plants economically viable. Taiwan and South Korea built those networks over two decades. India is attempting the same in under five years, and the strain shows in procurement lead times already stretching past 14 months for basic consumables.

Allocators should note the fiscal structure. The ₹1.64 lakh crore includes both government incentives and private capital, weighted roughly 40-60. That private portion is largely Taiwanese and American joint venture money, not domestic Indian industrial groups. The ancillary gap creates a follow-on risk: if substrate and chemical suppliers do not localize within 24 months, OSAT plants will run at higher operating costs than their Southeast Asian peers, eroding the margin advantage that justified the initial capital deployment. India then becomes a subscale, higher-cost node in a global network optimized for Malaysia, Vietnam, and coastal China.

The government has not published a supplier localization roadmap. NITI Aayog's public statements focus on fab count and wafer capacity, not on the 47 categories of ancillary goods a functioning OSAT cluster requires. Industry executives are now lobbying for a second-tier PLI scheme targeted at chemical precursors and substrate materials. That scheme does not yet exist. If it arrives in the next six months, suppliers could begin construction by mid-2026 and reach production by early 2028. If it does not, India's OSAT plants will import consumables at a 22-27% cost premium, and the ₹1.64 lakh crore will have bought expensive assembly lines without the ecosystem to make them globally competitive.

Watch for three signals. First, whether New Delhi announces a focused ancillary PLI by September 2025. Second, whether any of the three OSAT projects under construction sign long-term local supplier agreements before their own commissioning dates. Third, whether Taiwanese substrate manufacturers—particularly those serving TSMC's CoWoS advanced packaging lines—file Indian subsidiary registrations in the next 90 days. Those registrations would indicate private capital believes the ecosystem will mature. Their absence would indicate the opposite.

India has the fabs coming. It does not yet have the Industrial Age 4.0 supply web to keep them fed at Taiwan pricing.