The pandemic caused a dip in the supply of semiconductor chips, affecting the production of new cars and computer parts. Prices of these items shot up due to a shortage of the chips which make the electronic circuits and devices smart.
India is on the way to realizing its long-nurtured dream of becoming a hub for electronic goods. With the signing of a deal with the US on a semiconductor supply chain and innovation partnership, India will likely fill the world’s semiconductors gap. Semiconductor chips, also known as integrated circuits, have a wide range of uses in modern technology. They are used in electronic devices such as computers, smartphones, televisions, and many other devices, and have revolutionized the way we live and work by enabling the development of advanced digital technology. The main function of semiconductor chips is to perform logic or memory functions. They can process and store digital data, enabling the operation of complex electronic systems.
Semiconductor chips are also used in communication systems, such as radios, televisions, and cell phones. They play a vital role in transmitting and receiving signals, as well as in processing and decoding data. In addition, semiconductor chips are used in many industrial applications, such as automation and control systems, as well as in the automotive industry, where they are used in engine control systems and other electronic components. The pandemic caused a dip in the supply of semiconductor chips, affecting the production of new cars, electronic products, and computer parts. Prices of such items shot up due to shortage of the chips which make the electronic circuits and devices smarter.
China and the US are the leaders in semiconductor chip production. A large part of their semiconductor chips is produced in Taiwan. Tense relations between China and Taiwan have impacted chip production and supply. A disruption in semiconductor supply has led to billions of dollars of losses for major companies across the globe. A Goldman Sachs report suggested that at least 169 industries had been impacted by the global chip supply shortage in 2021. The crunch has eased now but some disruptions in the supply chain still exist.
The chips are made from silicon, available in plenty on Earth, and are fitted into microcircuits that power electronic components. The raw materials come mostly from Japan and Mexico. Some popular companies that manufacture semiconductor chips are Intel, Samsung, Taiwan Semiconductor Manufacturing Company, Broadcom, and Nvidia. The pact with the US will definitely make India’s chances bright of bridging the demand-supply gap. India will gain immensely after this development.
India has been heavily reliant on semiconductor chip imports, with local production meeting only a small portion of domestic demand. The pandemic disrupted global supply chains, leading to a shortage of chips worldwide and affecting industries such as consumer electronics, automotive, and telecommunications. The shortage also impacted the Indian market, with automakers and smartphone manufacturers facing production cuts and delays. To address this issue, the Indian government launched several initiatives to boost local semiconductor manufacturing, such as the Production Linked Incentive (PLI) scheme and the National Policy on Electronics (NPE).
In April 2021, the government approved setting up two semiconductor manufacturing plants in the country, with an estimated investment of over $1.51 billion. However, it may take some time before India becomes self-sufficient in semiconductor chip production. Overall, the current status of semiconductor chips in India is that the country is highly dependent on imports and is taking steps to boost local production to reduce reliance on foreign manufacturers. But, the pact with the US will make things forward.
Narvijay Yadav is a senior journalist and columnist. Views are personal.
Twitter @narvijayyadav
