Outsourced Semiconductor Assembly and Testing (OSAT) is a critical business concept and service model in the global semiconductor supply chain, referring to the outsourcing of the final, post-fabrication stages of chip manufacturing. Historically, most semiconductor companies were Integrated Device Manufacturers (IDMs), handling design, fabrication, assembly, and testing in-house. The OSAT model emerged as the industry disaggregated, solving the problem of massive capital expenditure and the need for specialized expertise in the back-end process.
The mechanism involves a chip company, often a fabless firm like Qualcomm or an IDM like Intel, sending its completed silicon wafers to the OSAT provider. The OSAT company then performs the essential steps: cutting the wafer into individual chips (dies), IC packaging (encapsulating the die in a protective casing and providing electrical connections), and rigorous electrical testing and final quality assurance. This specialization allows chip companies to focus on design and fabrication, while OSAT firms achieve economies of scale and provide advanced packaging technologies like System-in-Package (SiP).
In India, OSAT is directly connected to the India Semiconductor Mission (ISM), which aims to build a robust domestic electronics ecosystem. The government introduced the Modified Scheme for setting up of Compound Semiconductors / Silicon Photonics / Sensors Fab and Semiconductor ATMP / OSAT facilities in India. This scheme, notified by the Ministry of Electronics and Information Technology (MeitY) on October 4, 2022, and revised on June 30, 2023, provides significant fiscal support. Specifically, it offers 50% of capital expenditure as a subsidy to approved applicants for setting up OSAT facilities, demonstrating a recent, major policy shift to attract this crucial segment of the value chain.