Since the pandemic struck the world in early 2020, we have heard about the semiconductor industry and chip shortage. Since semiconductors are of use in the automobile and electronics industry, they were the first to get hit.
But what are these semiconductors, and why are they so important? This blog will better understand the industry and what is being done to overcome the shortage.
A semiconductor can be defined as a microchip or an integrated circuit. These have materials that can do two jobs simultaneously. One, conduct electricity between two materials and provide insulation between two other materials. A semiconductor is known to have the properties of both a conductor and an insulator. This property of semiconductors makes it indispensable to electronics where there is a need to conduct electricity in a controlled fashion.
Semiconductors use raw materials like silicon, germanium, metals, gallium arsenide, etc.
These are important to the survival of modern life since it is a crucial element for most electronic devices. These include laptops, computers, medical equipment, mobiles, even watches and cars. They make all electronic devices in our life faster, cheaper, and highly efficient.
Computers use semiconductors like microprocessors, graphic processing units and memory units. They also find its use in household appliances like refrigerators, washing machines, and air conditioners. Moreover, the ATMs we use to withdraw cash also use hi-tech semiconductors to function seamlessly.
From Wi-Fi to healthcare devices like blood pressures machines, semiconductors find immense use in our day-to-day life. Therefore, the foundation of a modern, global world is likely to crumble without semiconductors.
There are essentially two kinds of companies that operate in the semiconductor industry. One is a ‘fable firm’ that focuses only on the semiconductors’ design aspect. The others are ‘foundries’ and focus only on manufacturing the semiconductors.
Let us now look at some of the top semiconductor companies operating in India and listed on the stock exchange.
This company offers electronic integrated circuits used in devices like mobile phones and computers. SPEL runs India’s only semiconductor assembly and test facility called ‘Natronix’.
This company designs semiconductors focusing mainly on turnkeys, mixed-signal IPs, and the Internet of Things. Moschip offers semiconductor solutions to its clients globally.
This is a company that an American corporation now runs. Ruttonsha International deals in manufacturing semiconductor devices, diodes, and power rectifier assemblies.
The company offers product development, R&D, and engineering services to its clients. Most of their clientele includes companies manufacturing equipment and devices with semiconductors. Thus, ASM is susceptible to the events of the semiconductor industry.
In August 2021, the company announced its decision to move into semiconductor manufacturing and plans to invest $300 million. Tata Elxi operates in the semiconductor industry, where it is involved with artificial intelligence tools, design solutions, and frameworks.
The company is the largest manufacturer of LED TV screens in India and works with brands like Samsung, Xiaomi, Panasonic, OnePlus, Philips, Havells, etc. Dixon Technologies has recently started working in laptop, mobile, and ICT hardware, which relies heavily on semiconductors.
Vedanta Group has recently announced investing in India’s display and semiconductor chip industry. The company plans to invest $15 billion over the next 5-10 years for the same.
What happened in early 2020 included a sudden drop in demand for semiconductors amid a global lockdown. Some semiconductor factories in East Asia pulled their shutters down due to abysmal demand. All this happened while automobile companies were cancelling their orders for chips amid slow demand for cars.
With the reopening of the economy, there was a sharp upswing in demand for electronic items, including laptops, computers, and phones with people working out of their homes. This along with recovery in the automobile industry, the semiconductor supply chain had a disruption. The suppliers have no means to manufacture chips, and chip-intensive companies wait to fulfil their orders.
Since the production of chips cannot be magically pushed, many industries that use these chips are still reeling under a chip shortage.
The semiconductor industry in India relies completely on imports. Countries exporting semiconductors (to many countries, including India) include China, Taiwan, the USA, Japan, and a few European nations. However, India enjoys an advantage viz-a-viz designing chips. As a result, India uses 20,000 engineering hands to make 2,000 chips each year. However, the industry is still dominated by the USA, China, and Taiwan.
The Indian Government announced a Rs 76,000 crore package to boost its semiconductor industry to develop semiconductors and display manufacturing ecosystems in India. The Government also announced incentives worth Rs 2.3 lakh crore for companies. This is to help them pit India as a global electronics and semiconductor manufacturing hub. Until February 22, 2022, the Government received proposals from companies worth Rs 1.53 lakh crore to help put India on the global map.