Conductors, semiconductors, and insulators are essential elements of technology today. These components are integral to gadgets and devices we use every day. Semiconductors, in particular, are invaluable for their role in electronic devices such as laptops, gaming consoles, and smartphones. They perform various functions within a single device and are produced from 200mm or 300mm wafers, split into tiny chips.
The Causes of the Semiconductor Shortage
The semiconductor shortage crisis originated from dramatically increased sales of laptops during pandemic-induced lockdowns. Simultaneously, there was growing demand for home networking gear, webcams, and monitors due to the shift towards remote working and learning. The high consumer appetite for these low-end products, along with large orders from tech firms, led to an overwhelming demand on chip makers who were already grappling with factory closures during lockdowns.
Additionally, the industry shift towards 5G technology further strained resources as it required expensive, larger diameter wafers, which were in short supply. Logistical complexities and escalating transportation costs only exacerbated the supply crunch, driving up the price of core components.
The Impact of the Russia-Ukraine Conflict on the Chip Shortage
The ongoing conflict between Russia and Ukraine has further intensified the global chip shortage. Ukraine is a supplier of rare gases used for producing semiconductor fab lasers, while Russia exports rare metals like palladium, key to semiconductor production. As Western sanctions hit Russia, this could disrupt exports and limit options for semiconductor firms to source raw materials needed for chipset creation.
The Role and Uses of Palladium
Palladium, a silvery-white rare metal, is often used as an alternative to gold in device manufacture. It is used extensively in electronic devices given its malleability, resistance to corrosion and denting, and durability. From automobile makers to electronics manufacturers and biomedical device producers, this metal is preferred for making chipsets, circuit boards, and Multi-Layer Ceramic Capacitors (MLCCs), which are instrumental in the production of smartphone screens, stereo systems, and power circuit breakers.
Adapting to Changes: Businesses and Governments Go Local
In response to the global supply chain disruptions, businesses are reconsidering offshoring plans and are starting to embrace ‘reshoring’. This involves returning production and manufacturing processes back to the company’s original country. Giants like Intel are committing substantial investments in local manufacturing, with plans to build more chip fabrication facilities within their home country.
Governments too are stepping up to support these changes, such as the US government’s attempt to pass the CHIPS Act. This would provide semiconductor firms with substantial subsidies to advance chip making in the country.
What is a Semiconductor Chip?
A semiconductor chip is an electric circuit comprised of many components formed on a semiconductor wafer. These chips are present in everyday devices and find widespread use across various industries, especially in the automobile industry. Semiconductors are materials with a conductivity between conductors and insulators, and can either be pure elements or compounds.
India’s Semiconductor Demand and Initiatives
India, currently importing all chips, sees a market predicted to leap from USD24 billion to USD100 billion by 2025. The Union Cabinet has recently allocated funds to support the development of a ‘semiconductors and display manufacturing ecosystem,’ recognizing the strategic significance of integrated circuits or chips to a modern economy. Furthermore, India has launched the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) with an eight-year budget outlay for the manufacturing of electronics components and semiconductors.