There is a global shortage of semiconductors worldwide and this affects the global manufacturing as well as sales regime. Governments across the world, especially in South Asia are worried about their loss. Taiwan is the leading producer of semiconductors in the world, alongside China, and India already wants to establish the manufacturing hub here, so they are in talks currently to determine the manufacturing scale & rate. The reports are that China is quite a bit aggressive on this issue because of its earlier enmity with Taiwan. Read how India can take advantage of China’s manufacturing downfall.

Taiwan and India are on discussion terms to bring home the manufacturing of Chip plant. This would cost $7.5 billion and would bring tariff reductions for those components that produce semiconductors. This would accelerate the two latest broad dimensions in India- 5G connectivity & Electronic vehicles.

Looking at crisis more deeply:

If we consider the present scenario then the conjunction of India and Taiwan for semiconductors manufacturing is quite unprecedented. It also serves a good purpose for the country as everyone it is time for India to dive deeper into the manufacturing sector. But first of all, let’s examine what caused the semiconductor shortage.

The functions of semiconductors are of a wide range because of their property of insulation as well as conduction. The tiny semiconductor chips help in display and data transfer. They are used in appliances like TV, fridge, cars, laptops, and others. Now, the fact that these devices fell short in supply could be explained by two reasons:

• Due to the global pandemic crisis, the shift of the whole world ‘digitally’ got the supply of semiconductors short. Although cars and EVs were not in use so much due to the lockdown, other appliances like the TV, fridge, laptops, etc. had been consistent household usage. They could not be neglected as people were locked inside their homes. More and more of them turned to buy these appliances but considering the demand, supply fell short. Hence, there is now the latest need to install an appropriate amount of manufacturing hub globally. And Taiwan’s company Taiwan Semiconductor Manufacturing Corporation has taken this responsibility on its shoulders. It is the world’s largest contract chipmaker with 56% of global business. All tech giants like Qualcomm, Apple, etc. are its customers.

• The manufacturing of semiconductor chips is not an easy task as the setup of units is a complex task. Due to the growing tension between the USA and China, many of the Chinese companies are blacklisted in the U.S. China was a leading manufacturer of the same along with Taiwan but now that has been restricted. Pertaining to this, the allies of the U.S. are also dependent on chip delivery.

The areas that are affected by the semiconductor shortage:

Due to the increase in wafer prices by the foundries that manufacture chips, the device prices are increased by the semiconductor companies. Almost all the sectors are now experiencing a shortage in supply.

The worst hit is the automobile sector. The sales of the maximum number of companies got cut by 60-70% and they heavily ordered the semiconductors. Some companies are even cutting their output and suffering from “no production days”. This would lead to heavy employment losses and wage cuts too.

Also, the tech companies like Apple and Samsung are facing the same crises. The legacy nodes of the mobile companies are hard to be created due to a shortage of semiconductors. These hurdles their function of display and decoding audio.

India has taken a good step in this direction by establishing talks with Taiwan to set up a semiconductor manufacturing hub here.

The world is reported to continuously face the crisis of semiconductor shortage in 2022. But in the upcoming years, this would strengthen India’s position as a manufacturing hub in South Asia, taking over from China.