Semiconductors

News: Chips or processors power every possible product on the market from high-end cars to washing machines. There is a worldwide shortage of semiconductor chips.

What are Semiconductors?

  • A semiconductor sits between a conductor and an insulator and is commonly used in the development of electronic chips, computing components, and devices. It’s generally created using silicon, germanium, or other pure elements. Semiconductors are created by adding impurities to the element.
  • Semiconductor manufacturing is now dominated by Taiwan Semiconductor Manufacturing Company (TSMC) in Taiwan and Samsung Electronics in South Korea. American chipmaker Intel now plans to spend $20 billion to build two new chip factories in Chandler, Arizona. These new fabs will also manufacture chips designed by Amazon, Qualcomm, and other customers.

Factors responsible behind shortage:

  • During the pandemic, manufacturing came to a standstill impacting the supply chains of products that need one or more of these. As the automotive sector almost shut down last year, chip makers shifted capacity to cater to increased demand for electronics items such as cell phones and laptops.
  • Since orders for advanced chips are placed well in advance, manufacturers have not yet been able to come back to pre-pandemic production schedules to cater to all sectors.
  • The automotive chips are of medium-level complexity, compared to the really small and extremely complicated ones on smartphones and personal computers.
  • Building something this small, featuring billions of transistors is an expensive process.

Indian scenario:

  • There is a lot of risks involved in setting up a chip plant. Past initiatives to set up chip manufacturing units in the country never took off due to lack of long-term vision, lack of government incentives, and poor planning.
  • Now the government is keen to promote manufacturing and has even proposed tax incentives under Production Linked Incentive Scheme. Things are progressing slowly, but the recent announcement of Tata Group entering semiconductor manufacturing is being seen positively.

Global scenario:

  • The global chip crisis and geopolitical tensions with China have shifted focus back on semiconductors. The US, which was once a leader in chip manufacturing, wants the crown back.
  • The protectionist US is looking to bring manufacturing back to America and reduce its dependency on a handful of chipmakers mostly concentrated in Taiwan and South Korea. China’s renewed aggression on Taiwan is also being seen in light of the chip crisis.

Impact

  • The crisis is expected to cost the global automotive industry $210 billion in revenue in 2021. The global semiconductor shortage has affected many industries for more than a year and because of that, they are either forced to pay more for products or being asked to wait a little more.
  • The consumption of integrated circuits in products is ever increasing and a large manufacturing sector for these kinds of integrated circuits are a part of the supply chain. The shortage has affected smartphones, personal computers, game consoles, automobiles, and medical devices.