Semiconductor chips are essential for practically every industry worldwide. However, the semiconductor industry is facing extreme shortages globally due to limited supply. Apart from the long-standing issues faced by this industry, industry experts believe that the pandemic led to certain unavoidable challenges. For example, the industry leaders slowed their chip orders at the beginning of 2020 due to a massive drop in vehicle sales.

However, when the demand increased later, the industry had already changed its production lines to meet the rising demand for consumer appliances.

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An Overview of the Global Semiconductor Industry

Reports confirm that the global semiconductor market was approximately USD 527.88 billion in 2021. Furthermore, the market value is estimated to hike USD 1380.79 billion by 2029. The growth of the semiconductor market accredits the rising consumption of consumer electronic appliances globally.

Furthermore, there are new opportunities for market development with the implementation of advanced technologies, namely machine learning, artificial intelligence, etc. These technologies help memory chips process a large amount of data in a minimal turnaround time, driving market growth gradually.

With the changing global outlook towards interconnectivity in both personal and professional space, the semiconductor industry has become the bedrock of a comprehensive digital overhaul. Semiconductors are a pivotal component for the optimal operability of almost all electronic equipment used worldwide. Therefore, some of the most information-intensive sectors, such as energy and medicine, rely heavily on this technology for faster data generation and processing.

Top Reasons Behind the Global Semi-Conductor Shortage

The issue of semiconductor shortage is amplified by the fact that producing these elements is expensive, time-consuming, and complex. However, below are some of the reasons behind the global semiconductor shortage:

• The Pandemic: The crisis began during the first global lockdown affecting industries massively. Chip testing and packaging are labor-intensive, and the resurgence of the pandemic affected this area mainly, creating a bottleneck in the supply chain. However, with the resurgence of the virus, industries were affected again, leading to a shortage in supply chain management.
• Russia-Ukraine Conflict: A recent conflict between Russia and Ukraine has also contributed to this massive shortfall. Said that Ukraine’s two leading companies of neon gas, a key ingredient required for making chips, halted their production as Russian forces seized the territory. Furthermore, almost 30% of palladium is supplied by Russia, a rare element used for semiconductors. The war has led to massive supply chain blockages, causing a shortage.
• Tension in Taiwan Strait: Taiwan produces almost 65% of semiconductors However, the recent issues in Taiwan have limited production, again causing a shortage in the supply of semiconductors. In addition, these increasing tensions between China and Taiwan have caused all Thai automotive sectors to face problems as manufacturers fear China may ban the export of raw materials used to make chips in Taiwan. This has further aggravated the situation.
• Disruption in Shipping: Moreover, consecutive shipping issues worldwide also contributed to supply chain disruption. For one, the container ship ‘Evergreen’ was infamously stuck at the Suez Canal in 2021 for an extended period, bringing the otherwise busy route to a standstill. Similarly, later that year, 77 cargo ships with products worth USD 24 billion could not enter the US ports due to a staff shortage.

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Critical Applications of the Semiconductor Industry

The semiconductor industry is making a significant impact towards:

• Household Products: From laptops, phones, or gaming devices to kitchen equipment, such as fridges and refrigerators, all depend on transistors and chips for adequate functioning capacity.
• GPS Systems and Tracking Devices: Satellite mapping facilities have made it comparatively easier to navigate one’s way when hitting the streets. The semiconductor components ensure that these embedded systems can work in tandem with the larger machinery while offering a user-friendly interface.
• Solar Energy: With the rise of climate change challenges, environmentalists worldwide are pushing for alternative sustainable energy sources. Consequently, installing solar panels in homes has become a need of the hour. So, silicon semiconductors have become the most commonly used element for solar panel cells.
• LED Lighting: As more and more people switch to LED lights from their traditional alternatives, the need for semiconductors has continued to surge. Amorphous semiconductors that can emit light as a diode are often used for LED and OLED bulbs with an extended product lifespan.

Can India Meet the Heightened Demand for Semi-Conductor Supply?

India imports approximately 94% of its electronics and almost 100% of its semiconductors, and with the introduction of Digital India, fulfilling this heightened demand will not be a challenge. As the world grapples with an extreme semiconductor shortage, it is time for India to progress in the right direction.

• India promises a strong base for semiconductor chip designing, being a software-intensive destination.
• The Government of India announced an incentive plan worth USD 9 billion in December 2021. This attracted several global semiconductor and display manufacturers so that they could establish our country as an international chip manufacturing place.
• This initiative will attract investments from top industries worldwide, pushing market development of semiconductors again.

In addition, several renowned corporations have come forth with joint ventures to contribute to the growth.

Why Should Foreign Companies Turn to India to Fill the Gap?

Foreign companies are turning to India to fill in the gap due to the following reasons:

• As per manufacturing consultants in India, this country ensures economic liberalization, pushing millions of companies toward growth.
• Since the industry is driven by software, a pool of talented engineers is working effectively to scale up the sector for worldwide semiconductor production.
• India is incubating a new ecosystem of chip manufacturing, thus reducing import dependency and allowing companies to supply faster.
• The government has initiated the PLI Scheme to boost semiconductor manufacturing. Since India has low labor costs and a vast production capacity, it will help the domestic industries reduce the reliability of semiconductor imports. Additionally, this will generate revenue from exports to other regions as well.
• Another scheme, Promotion of Manufacturing of Electronic Components and Semiconductors, promises to provide a financial incentive of almost 25% on capital expenditure for electronic goods. This allows a boost in the semiconductor industry sector.

How Can Tecnova Help in this Regard?

The rollout of Digital India initiatives and IoT has led to a new era in the electronics industry, allowing companies to do business in India. For example, one of India’s leading manufacturing consulting firms, Tecnova Global, offers customized manufacturing facility set-up support to domestic and international firms. This will allow them to progress into the electronics manufacturing market effectively.

Well, the Government is establishing several units, and manufacturing plant consultants believe that with the intervention of the State and Central Government, scaling up production will no longer be an arduous task. For example, the National Policy on Electronics 2019 aids in making our country a global hub for electronics design and manufacturing. This will boost the capability to produce essential components such as the chipsets. This will reduce import dependence and place India as a potential player in the supply of chips worldwide.

Reference

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