New India is self-reliant in many ways and it is estimated that India will start producing electronics products also worth Rs 30,000 crore rupees by 2026. The demand for such products is increasing day by day in the country. To install chips in these products, the country will need semiconductors worth at least Rs 6 lakh crore.
Preparations are underway to make the semiconductor indigenously. Currently India imports semiconductors from other countries. While addressing at SEMICON, the Semiconductor Conference held in Bengaluru recently, Rajiv Chandrashekhar, Union Minister of State for Information Technology and Electronics, said that the government has received proposals from many companies for electronic chip production. These include Vedanta Foxconn Joint Venture, IGSS Ventures and ISMC.
Meanwhile, semiconductor production has decreased due to the revival of Covid pandemic and lockdown in China. Integrated circuit production in China declined by 4.2 percent in the first quarter of this year. Semiconductor chip production declined 5.1 percent in March. Chinese electronics makers are fearful of supply chain disruptions. This can also have an impact on India, as India imports a lot of components from China.
India imports 100 per cent of semiconductors, of which half material is imported from China alone. Apart from the chip, many types of electronic, auto and mobile phone parts are also imported from the Dragon. There is such a shortage of chips in the world at this time that chip makers are working by extracting semiconductors from old washing machines bought from junk dealers. The chip shortage doesn’t seem to be going away anytime soon. The Russo-Ukraine war has disrupted supply lines, causing intermittent or halting supply of goods.
Taiwan Semiconductor Manufacturing Company, one of the largest chip makers in South East Asia, fears a reduction in chip production due to a shortage of manpower and parts. More than 169 industries, including electronics, have been affected due to chip shortage. In the last two years, people started working from home during the lockdown, due to which the demand for electronic products like computers, laptops, gaming consoles etc. increased. Chip makers, on the other hand, had reduced production.
A modern car uses 1,500 to 3,000 chips. During the pandemic, cinema halls were closed to contain the spread of the virus, forcing many people to turn to home entertainment during periods of self-isolation, fueling demand for video game consoles. The properties of semiconductors or chips are in between that of conductors and insulators.
Chips typically made from silicon are used to supply power to a wide variety of devices such as cars, laptops, smartphones, home appliances and gaming consoles. The chip performs many functions, such as power display and data transfer, etc. Hence, the supply crunch is bound to have an impact on the sales of cars, fridges, laptops, TVs and other electronic equipment. Taiwan is the world leader in semiconductor manufacturing.
Last year there was a severe drought, which caused problems for the chip makers. A large amount of pure water is needed to manufacture semiconductors. Chip production cannot be increased on short notice, because it is a complex process that takes months. It usually takes more than three months to make a chip. In such a situation, the problem is expected to persist till 2023.
Writer is a senior journalist & columnist.