The Hindu Editorial Analysis- 10th October 2022 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

The fate of chips will determine the fate of nations 

Context

Today’s most advanced chips are about half the size of the novel coronavirus in diameter and are shrinking rapidly. The fate of nations depends on this infnitesimally small piece of silicon, which can devastate and shape our lives in myriad ways.

About Semiconductors:

• Semiconductors are materials which have a conductivity between conductors (generally metals) and nonconductors or insulators (such as most ceramics). Semiconductors can be pure elements, such as silicon or germanium, or compounds such as gallium arsenide or cadmium selenide.
• Conductivity is the measure of the ease at which an electric charge or heat can pass through a material.
• They are also known as integrated circuits or more commonly just chips, they may be the tiniest yet most exacting product ever manufactured on a global scale. 
•  It's an electric circuit with many components such as transistors and wiring formed on a semiconductor wafer. An electronic device comprising numerous of these components is called Integrated Circuit (IC), and can be found in electronic devices such as computers, smartphones, appliances, gaming hardware and medical equipment.
• These devices find  widespread use in almost all industries, especially in the automobile industry.
• Electronic parts and components today account for 40% of the cost of a new internal combustion engine car, up from less than 20% two decades ago.
• Semiconductor Chips account for a bulk of this increase.

Significance of Semiconductor Chips:

• They are the basic building blocks that serve as the heart and brain of all modern electronics and information and communications technology products.
• These chips are now an integral part of contemporary automobiles, household gadgets and essential medical devices such as ECG machines.

Recent Increase in Demand:

• The Covid-19 pandemic-driven push to take sizable parts of daily economic and essential activity online, or at least digitally enable them, has highlighted the centrality of the chip-powered computers and smartphones in people’s lives.
• The pandemic and the subsequent lockdowns across the world also forced shut crucial chip-making facilities in countries including Japan, South Korea, China and the US.
• Its shortage causes cascading effects, given that the first one creates pent-up demand that becomes the cause for the follow-up famine.

India’s Semiconductor Demand and Related Initiatives:

• India currently imports all chips and the market is estimated to touch $100 billion by 2025 from $24 billion now.
• The Union Cabinet has recently allocated an amount of ₹76,000 crore for supporting the development of a ‘semiconductors and display manufacturing ecosystem’.
• India has also launched the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) under which a budget outlay of Rs 3,285 crore is spread over a period of eight years for manufacturing of electronics components and semiconductors.

Challenges ahead:

• High Investments Required.
• Minimal Fiscal Support from Government.
• Lack of Fab Capacities.
• Insufficient Grants under PLI Scheme.
• Resource Inefficient Sector.

Impact:

• Countless industries have been affected as global demand for semiconductor chips continues to outstrip supply.
• Chip shortages are expected to wipe out USD 210 billion of sales for carmakers this year, with production of 7.7 million vehicles lost.
• The semiconductor shortage will severely disrupt the supply chain and will constrain the production of many electronic equipment types.
• The chip shortage directly impacts consumers as prices of everyday appliances and electronic goods — from TV to smartphones — have increased due to the global supply chain disruption.

Way Forward

• Emerging technologies, especially, Internet of Things, artificial intelligence, augmented and extended reality and blockchain are gaining prominence across industries. With these applications gaining traction across sectors, the need for specialised sensors, integrated circuits, improved memory, and enhanced processors is increasing.
• India is finalising plans to manufacture semiconductor chips in a big way, as a part of its ‘Make in India’ initiative. The nation is offering more than USD 1 billion in cash to each semiconductor company that sets up manufacturing units in the country.
• Chips made locally will be designated as “trusted sources” and can be used in products ranging from CCTV cameras to 5G equipment.
• In December 2021, India invited an “expression of interest” from chipmakers for setting up fabrication units in the country or for the acquisition of such manufacturing units.
• This is all being done to achieve self-sufficiency in the manufacturing of semiconductors, to ensure better control over data security and prevent countries in the world from being held to ransom by specific members of the existing semiconductor supply chain.
• It is clear that semiconductors are changing the game in our modern, fast-moving world. Therefore India should give semiconductors the status of “critical infrastructure'' in most countries, in the near future.