WHEN CHIPS ARE DOWN, INDIA STAKES ITS CLAIM

WHAT LED TO SEMICONDUCTOR AHEAD FOR THE SEMICONDUCTOR CHIP SHORTAGES AND WHAT LIES SECTOR AND HOW INDIA CAN CLAIM ITS PLACE IN THIS INDUSTRY

- P.N. SUDARSHAN, P.S. EASWARAN, MANIKANDA PRABHU

THE GLOBAL SHORTAGE OF SEMICONDUCTOR chips due to Covid-19-induced lockdowns in Asian countries and disruption in supply chains affected manufacturing across the world. The situation was expected to improve in 2022 and 2023 as OEMs started to retool their supply chain, products, and pricing strategies. Semiconductor companies and foundries also started setting up additional capacities to cater to the elevated demand. But the current geopolitical situation in Ukraine has brought in a fresh set of challenges that are threatening to accentuate the shortage, as the supply chains for some of the key raw materials used in the manufacturing process such as neon and palladium in addition to others are getting impacted.

Incidentally, it turned out to be a propitious moment for India to enter the global semiconductor value chain, and the government enabled it with a US$ 10 billion PLI scheme for semiconductor and display manufacturing industries, witnessing significant participation from key industry players.

Actions in the next three to five years will be crucial to creating the strategic capacity and domestic value chain as 'digital technologies' take centre stage in the new economic order.

THE SHORTAGE

The semiconductor industry is highly modular and involves heavy trading at each step of the value chain. While the shortage had its genesis in Covid-19-induced lockdowns and production cuts, increased demand for digital and electronic products post Covid-19, and the recent geopolitical crisis is extending the shortage into the medium term.