India's semiconductor ambitions just got a significant endorsement from Japan. Kaynes Technology India Limited has announced a three-way strategic partnership involving Japan's AOI Electronics the country's largest outsourced semiconductor assembly and test company and trading conglomerate Mitsui & Co, aimed at building a credible semiconductor backend manufacturing operation in India.

Speaking exclusively to ET Now, Dr Muthukumar Narayanaswami, Managing Director of Kaynes Technology, explained what the deal means for the company and for India's broader semiconductor ecosystem.

What the partnership actually involves

The collaboration operates through Kaynes Semicon Private Limited, the semiconductor subsidiary of Kaynes Technology. Under the agreement, AOI Electronics will provide technology transfer and technical expertise in semiconductor backend processing the critical stage of chip manufacturing that comes after wafer fabrication, covering assembly, packaging, and testing, collectively known as OSAT: Outsourced Semiconductor Assembly and Test.

Mitsui, for its part, will facilitate the commercial side securing exclusive rights to manage procurement of raw materials from Japanese-affiliated suppliers and international sources, and supporting the sales of products manufactured by Kaynes Semicon. Mitsui has also secured the right to acquire Kaynes Semicon shares in the future, signalling long-term strategic intent rather than a transactional arrangement.

The Government of India has approved the Kaynes Semicon project as an eligible initiative under the Make in India programme, which includes financial subsidies and policy support for semiconductor investments. The OSAT facility in Gujarat received government approval in September 2024 and is targeting operations in the second half of 2026.

The revenue picture for FY27

Narayanaswami was candid about the revised revenue expectations. The company had previously guided for Rs 1,000 crore in OSAT revenues -a figure that has since been revised to Rs 250-300 crore for FY27.

He addressed the revision directly, saying the thousand crore figure was meant to represent revenue over a three-year horizon, not a single-year target, and acknowledged a communication gap with investors. "With the capital investment of Rs 570 crore in semicon, expecting Rs 1,000 crore revenue is going to be near impossible in a single year," he said, adding that commercial production and sales from Kaynes Semicon are committed to start from the third quarter of FY27.

On the broader order book, Narayanaswami said the company's order pipeline remains strong at Rs 8,300 crore - a level that has been maintained even as the first quarter executes, with new business continuously replenishing the pipeline. He said Kaynes expects to grow at twice the rate of the broader market.

Why Chinese competition has not materialised

One notable point Narayanaswami made was around competition. The refurbished electronics and semiconductor assembly space, he said, requires a level of individual hand craftsmanship that does not lend itself to the machine-oriented, high-scale manufacturing where Chinese players have traditionally excelled. Each device requires differentiated handling - a characteristic that has kept large Chinese competitors from entering this segment in any meaningful way.

The bigger picture for India

The Kaynes-AOI-Mitsui partnership sits squarely within India's national push to build a domestic semiconductor supply chain from materials and packaging to assembly, testing, and supply chain integration. The initiative aligns with India's national push to expand its manufacturing sector under the Make in India programme, which includes significant incentives and subsidies to accelerate semiconductor investments.

For Kaynes, the deal is about more than FY27 revenue. It opens a pathway into Japanese automotive, industrial, and electronics markets over a five to ten year horizon - and gives India's semiconductor ambitions a credible Japanese technology anchor at a time when global supply chain diversification is accelerating.

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