The semiconductor war has started. Countries across the world are making efforts to be the next semiconductor hub.
Let’s explore how India could win the war against the US and China.
What’s happening?
A slump in manufacturing three products has put the world into deep thought. These three things are cars, smartphones and gaming consoles. And the culprit behind this shortage is none other than semiconductor chips. No wonder semiconductors are now considered the new oil for the manufacturing industry.
The shortage of semiconductor chips started in 2020 during the COVID-19 lockdown. People began purchasing gadgets for their work. Moreover, during the same time, gaming consoles like PS5 and Xbox Series X sales climbed to all-time highs. This increased demand and low supply led to a shortage of semiconductor chips.
Impact of shortage of semiconductor chips
The automobile industry worldwide had the worst hit.
• Japanese carmakers like Toyota and Nissan had to cut their output targets.
• Ford lost $3.1 billion in revenue in the first quarter due to a chip shortage.
• Honda had to cut down vehicle production.
Production of semiconductor chips
A few countries - Taiwan, South Korea, China and Japan - dominate semiconductor chip production. But many countries are trying to set up semiconductor plants to become the next hub and self-sufficient for their semiconductor needs.
India has been making some conscious efforts to get into the race.
According to Economic Times, the government has said it will give cash incentives of more than $1 billion to each company that will set up chip fabrication units in India.
Tata group will soon enter the semiconductor industry. It plans to manufacture, assemble and test chips in India.
Moreover, according to CNBC TV-18, the government may mandate that companies buy Made-in-India semiconductor chips once local production starts.
Yes, the competition is intense as the US is also marching towards being a semiconductor hub.
According to Livemint, US President Biden has proposed a contribution of $50 billion for the American semiconductor industry. It is a part of his $2 trillion infrastructure plan. They are also in talks with Japan for joint research on semiconductors.
Lastly, China has been heavily investing in developing semiconductors. In 2020, China invested around $35.2 billion in semiconductors, a 407% year-on-year jump from 2019.
What’s next?
India is running the race for semiconductors with two gigantic countries by its side. But India has an advantage, too, as it is the potential manufacturing hub after China. So, if more and more companies take advantage of India’s ‘Make in India’ scheme and start manufacturing in India, they might as well set up their semiconductor plants in India. This may help India in achieving its dream of being a semiconductor hub.
Karnataka recently partnered with Israel-based International Semiconductor Consortium (ISMC) to set up a $3 billion semiconductor plant. Moreover, Vedanta Ltd and Taiwan's Foxconn signed an agreement with Gujarat for a $20 billion semiconductor unit.
That’s an excellent start, but we have a long way to go.
