Current Affairs 2022 : Shortage of Semi-Conductors and India's Initiative

By Ankita Rawat

Recently, we saw the shortage of Semi-Conductors across the globe. Read here to know the reason behind such shortage and the steps taken by India to tackle the situation.

Since the pandemic has hit the world, several companies highlighted their concern around the chipset shortage across the sectors. The demand for semiconductors is exceeding the supply which has affected consumer electronics companies and automobile manufacturers across the world.

The chip shortage situation is still not expected to get better anytime soon and supply hindrances could sustain till 2023. Companies are struggling to ramp up production, but the situation will not get better anytime soon.

What are Semi-Conductors?

Chipsets or semiconductors have the combined properties of insulators and conductors. These chips are made of silicon that powers a variety of devices like laptops, household appliances, cars, smartphones, and gaming consoles. The manufacturing of these chipsets cannot be improved in a short period because chip manufacturing is a complex process. The increment in sales for electronic devices has created a huge demand for chipsets. Also, COVID 19 is not only the reason behind the shortage but the intense relationship between China and United States is also a factor because several US Companies do business with companies from China.

In India, there’s a price hike in almost every smart device, the brands like Xiaomi, Realme, and Samsung have risen its price to 3-5 per cent and laptop prices are rising by 2-3 per cent every month for the last few months.

Shortage of Semi-Conductors

However, the primary reason for chip shortage is COVID-19 induced lockdown but there are other reasons as well that slowed down the production process. For instance, In July 2020, there was an incident occurred in Japan, there was a fire at the semiconductor plant that makes chip elements called Ajinomoto build-up film (ABF) possibly hindering chip production as per a report by Fortune in September 2021.

In October 2020, there was a fire incident occurred at the chipset plant belonging to sensor maker Asahi Kasei Microdevices in Japan that incident has affected the supply of chipsets. Another reason for the chip crisis is a shortage of containers, the large containers are used to store and transport items through the sea, which is a major mode of global shipping. As per IDC, the semiconductor crisis isn’t a shortage of chips itself but also a supply chain problem these container shortages have made it difficult to ship chips through the sea so transporting via air will add more cost to end products.

Project44, a Logistic tech company said that COID-19 easing of covid-19 restrictions there’s a surging consumer demand has directly caused a “dearth of container capacity” and constant congestion across the entire size of the supply chain. Also, Project44 noted how demand in the US played a role in this situation as 40 containers were exported for every 100 containers being escorted onto American soil.

Things went worse when China didn’t receive its containers back, the container shortage is also extremely influenced by the high quantity of imports that Europe and the US get from China. So, the Chinese imports from the West are not even marginally substantial & getting the containers back to China is a huge reason for the shortage.

Shortage of Semi-Conductors and India's Initiative

The Ministry of Electronics and Information Technology has introduced the Scheme for Promotion of manufacturing of Electronic Components and Semiconductors.

After the completion of the successful 1st round of the Production Linked Incentive Scheme (PLI) in captivating investments in electronic component manufacturing and mobile phone, the proposal for accepting applications under the 2nd round of the PLI scheme has been approved by the Competent Authority. The scheme expects an investment of INR 76,000 cr in semiconductor production over the next 5-6 years.

The Scheme aims to provide great incentive support to consortia/ companies that are engaged in Silicon Semiconductor Fabs, Compound Semiconductors/ Sensors Fabs/ Silicon Photonics, Display Fabs, Semiconductor Design, Semiconductor Packaging (ATMP/ OSAT).

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About the Author

  Ankita Rawat is doing graduation in BA(JMC) from JIMS Vasant Kunj, New Delhi.