If we take a pause and look deep in to our tech world what do we see, many people desperately making what’s a distant future seem tomorrow, artificial intelligence and robotics taking over the world and many new innovations that makes world even smaller. And everything that we thought we could just imagine is becoming a reality because of one invention, transistors. Today as we all know a global pandemic destroyed every sector so it even had great impact on the semiconductor sector which is an integral part of what we call a tech all-rounder.
Semiconductors are everywhere from electronics to cars and mobile phones. With the economic collapse world-wide due to the pandemic the chips demands fell and by the time demands rose the production was less. Why do you think this technology which aged well over 60 years is facing a shortage which led to various car makers and smart phone companies to halt their production or increase their price? And where do India stand in this?
This problem arose due to two major reasons:
1.Bad supply chain management
2.Geo-political tensions
Major companies that use these semiconductor-based devices are situated in countries like USA, Japan, South Korea, China and Taiwan. For a long time, many tech giants like Nvidia, Qualcomm and Intel used to design and manufacture chips on their own but later on they decided to outsource the manufacturing to countries like Taiwan, China and Japan and improve their design. Even though the USA accounts for more than 50% of their sales only 12% are their own manufactured chips. America is more of design dominance which requires engineering excellence which are high paying jobs, in order to reduce cost of manufacturing they outsourced the jobs to countries like China, Taiwan and Japan where they are more skilled labourers for less wage than USA. Due to ongoing trade war between USA and China experts fear that China might absorb Taiwan and impose an embargo on TSMC which is the largest semiconductor manufacturing company in the world. If this problem has to be resolved from roots, the American and European government can ask for companies like TSMC and Samsung to diversify their manufacturing bases to USA as it can be more efficient and reliable. But this seems it involve a potential political risk and can cost billions of dollars which makes the government and companies think twice meanwhile lead to confusion and shortage of semiconductors.
The supply chain management has been one of the major issues that led to this shortage. Recently, The American President Joe Biden signed an executive order to review the short-term semiconductor shortages and provide a possible solution for the whole electronic industry hit problem. His order also includes to provide incentives to manufacture these devices in the USA. Meanwhile the companies have asked for funding to innovate and for infrastructural demands to be met for manufacturing plants to be established.
Now the real question arises what does an Indian really have to do with all these data? If we look at it the semiconductor industry is dominated by East Asia and few players from America and Europe. When it comes to semiconductors India is nowhere in the race, that demands high imports which indirectly means higher cost borne by the consumer. If this semiconductor shortage is creating a ruckus in US, it definitely is going to affect the prices of imported products and in terms of electronics almost 75% are imported which may lead to uncontrolled inflation.
Considering semiconductors, India is aiming to be a key player in automobile and smart phone manufacturing and seeing the upsurge in number of start-ups based on electric vehicles and electronics a semiconductor manufacturing base is crucial for the country.
This semiconductor industry has got a huge potential in terms of market value. The semiconductors are emerging valuable commodities as the demand for electric cars and green energy grew every device is some way or other is depended on semiconductors. With investments of few billion dollars today it might be worth around 100 billion dollars by 2025-26. This investment has huge scope not just for ‘Atmanirbhar Bharat’ but also can emerge as global supplier. India has been dependent on east Asia for quite a long time, to become a key player in electronic this industry has to be established.
Many experts believe that setting up manufacturing bases in India is surely difficult but not impossible as it used to be. It is manly because India is a master at semiconductor chip design but not in manufacturing. This was mainly due to huge infrastructural requirements and a cost of around 10 Billion dollars of requirement for production and maintenance of devices each year. But now the economy grew and India can establish semiconductor fabrication units or Fab units. This investment is worthy because it can give employment to around 1 million middle class society to thrive up and reduce unemployment. Considering the population of the country grooming skilled work force will not be a big issue. And a few infrastructural developments make way for it. Considering geo-political issues of USA and china trade war and china’s aggression towards Japan and the newly formed Quad alliance, setting up of a fab unit attracts investments from potential countries like USA, Japan, South Korea etc. With proper public-private partnerships the reality of fab units in India is possible.
If this comes into reality Indian economy is going to receive a major boost considering the talent here. The only thing that we lack now is start-ups which are ready to take lead in R&D and manufacturing based idea that take responsibility of such a major change.
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