India’s semiconductor ambitions are facing cost pressures amid the ongoing conflict in West Asia, which is disrupting energy markets and global supply chains. Industry executives and analysts say rising crude prices and logistics disruptions are increasing the “real cost” of setting up and operating chip manufacturing and assembly units in the country.
The impact is being felt across the semiconductor value chain, particularly in segments that depend on imports and the global movement of materials.
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Rising Energy and Logistics Costs Add Pressure
The conflict has triggered volatility in oil prices and shipping routes, both of which are critical to semiconductor manufacturing. Higher fuel costs are pushing up transportation, fabrication and plant operations expenses.
India relies heavily on imported inputs and energy-linked materials. Any disruption to prime routes, such as the Strait of Hormuz, affects freight and insurance costs.
Chipmaking is a capital-intensive sector with tight cost structures. Even small increases in input or logistics costs can affect project viability and timelines. The broader ripple effect is evident across sectors, with supply chains tightening and production costs rising in multiple industries due to energy-related disruptions.
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Semiconductor Plans Face Setbacks on Execution
India has been positioning itself as a global semiconductor hub, offering incentives and policy support to attract investment. However, the current geopolitical situation is complicating execution.
Outsourced Semiconductor Assembly and Test (OSAT) facilities form a key part of India’s near-term strategy. They are expected to be among the most affected due to their dependence on global supply chains.
Delays in equipment movement, higher input costs and uncertainty in supply availability could slow project rollouts. This comes at a time when India is trying to reduce dependence on imports and build domestic capacity.
Industry experts caution that prolonged instability may increase overall project costs and extend payback timelines, potentially impacting investor sentiment in the sector.
Samarjit Kaur is a journalist and communications professional covering technology & emerging digital trends. With a focus on clarity and context, she reports on developments shaping industries and governance. When not reporting, she chooses to plug-in and relax on her playlists and plan her next bucket-list trips!
