The Semiconductor Manufacturing Industry Needs Public Investments!

  • The information technology tools, equipment, and aids have acquired strong presence aftermath of the pandemic forcing several verticals to adopt digital media as a preferred mode of workings. The buzzword going around the universe must be none other than virtual and/or online allowing some of the industries to work from home wherever possible. The unprecedented demand for the digital medium, including education and entertainment, on the back of the pandemic-induced restrictions, has pushed new boundaries for the information technology industry. To complement the dynamic evolution of software, the hardware required to supplement the phenomenal growth in the sector is proving to be quite cumbersome as reports emerging suggest.

PC: Ayush Verma

  • As you are aware, semiconductors are an inalienable part of the IT sector whose unrestrained availability facilitates the industry to keep scaling newer heights on a perpetual basis. As is known, semiconductors are employed in the manufacture of various kinds of electronic devices, including diodes, transistors, and most importantly, integrated circuits driving the information technology revolution relentlessly. However, it is to be noted with some concern that the Indian automobile industry is reporting a significant drop in wholesale deliveries due to continuing global shortage of semiconductors. Most worryingly, the supply situation is not expected to ease any time soon either. The unfolding situation is large because the main manufacturing of the same is concentrated in a few countries.
  • Further delving on the same, there are essentially two types of semiconductor manufacturing companies viz. those who design and manufacture on their own like Intel and Samsung, and foundries that contract manufacture chips like the Taiwanese giant TSMC. As mentioned above, the shortage has been further compounded by the advent of 5G technology, the growing need for greater computing power, an exponential increase in information communication technology and digital entertainment products. What is the prudent way to address the issue of semiconductor shortages? The obvious solution is to increase the narrow base for semiconductor manufacturing. There is a hitch here as establishing foundries is hugely capital intensive that comes with a gestation period of up to three years.

PC: Simplilearn

  • No wonder, efforts to expand semiconductor manufacturing capacity is underway with countries like South Korea and the USA are investing in hundreds of billions of dollars with an express intention to ensure a steady supply of chips. How does India fare in its policies to promote domestic chip manufacturing then? Nothing to rave about. The government in December 20120 invited proposals from companies to set up fabrication facilities after failing to recognize strategic implications for years. Offering cash incentives as a policy to each semiconductor company setting up a manufacturing unit will serve a limited purpose where 90% of the value of a chip is split between design and manufacturing. The need of the hour is to pump in a huge amount of public money as well as frontload substantial investments if India wishes to stay relevant in the hunt. The government should not waste precious time in mulling over the matter. It should act fast and now.