L&T Semiconductor to Bring Chip Assembly and Test Home as India's OSAT Turns Cost-Competitive

A fabless designer votes with its supply chain

L&T Semiconductor Technologies (LTSCT), the chip-design arm of engineering giant Larsen & Toubro, is moving its outsourced semiconductor assembly and test (OSAT) work to India — a decision that says as much about the maturing of India's packaging industry as it does about one company's strategy.

"We are already moving our OSAT operations for assembling chips to India because it is globally competitive," LTSCT chief executive Sandeep Kumar said, according to a report published on 3 August 2026. The company is a fabless designer — it develops chips but does not own fabrication plants — so where it chooses to have those chips packaged and tested is a real market signal. For the first time, the answer is increasingly "at home."

Why the back end is coming to India

OSAT is the "back end" of chip-making: once wafers are fabricated, the individual dies must be packaged, interconnected and tested before they become usable components. It is less capital-intensive than running a wafer fab, and it is exactly where India has moved first and fastest under its semiconductor push.

LTSCT's rationale is straightforward economics. Kumar said Indian OSAT players have become globally cost-competitive, making it viable to package chips domestically rather than shipping designs abroad for assembly. The company is already working with Tata Electronics, among others, as domestic packaging capacity comes online. Kumar was candid about the limits too: of roughly 500 semiconductor package types, Indian OSAT firms currently cover about 50, so for the remaining, more specialised packages the company still has to go overseas. He also noted that competition from Chinese firms remains intense, meaning LTSCT must be selective about products and pricing to protect its margins.

Notably, the shift is confined to the back end for now. LTSCT's chips are still fabricated at wafer fabs in the United States, Taiwan and Japan — a reminder that India's front-end fabrication capability, while under construction, is not yet ready for commercial-node production at scale.

Riding a wave of new domestic capacity

LTSCT's move lands as India's assembly-and-test capacity turns from announcement to output. Micron's ATMP facility in Sanand, Gujarat, is packaging and testing memory; Kaynes Semicon's Sanand OSAT plant was inaugurated earlier in 2026; CG Power's OSAT line is producing; and Tata Electronics' ₹27,120 crore facility in Jagiroad, Assam — built to handle wafer bumping, flip-chip packaging and test — is moving through qualification toward large-scale production expected by the end of 2026.

That build-out is being reinforced by policy. India's second semiconductor programme, often called Semicon 2.0, was cleared in mid-2026 with an outlay of roughly ₹1.27 lakh crore (about $13 billion) covering chip design, fabrication, display manufacturing, advanced packaging, equipment, materials and talent. For fabless firms like LTSCT, the combination of cost-competitive domestic OSAT and a deep incentive pool changes the calculus of where to build a supply chain.

Why it matters

A design house choosing India for assembly and test is the kind of demand-side validation the country's semiconductor strategy has been waiting for. Much of the story so far has been about supply — new plants, incentives, foundation stones. LTSCT's decision is a customer, unprompted by a ribbon-cutting, concluding that packaging in India now makes commercial sense.

The candid caveats matter as much as the headline. Covering only about 50 of 500 package types, still depending on foreign fabs, and facing hard Chinese price competition all show how far India's ecosystem has to travel before it is self-reliant across the chip stack. But the direction is unmistakable: as domestic OSAT capacity scales and costs fall, the back end of India's chips is increasingly being done in India — and the companies that design those chips are beginning to route their business accordingly.

Sources

• L&T Semiconductor goes local with chip backend, shifts OSAT to India — Business Standard
• Geopolitical shifts are working in India's favour: L&T Semicon chief — Outlook Business
• Inside L&T Semiconductor Technologies' strategy to strengthen India's semiconductor capabilities — Machine Insider