As Fossil Fuel is considered the backbone of the first industrial revolution, in the same way, semiconductors are considered the backbone of the fourth industrial revolution. Semiconductor chips, also known as silicon chips and microprocessors, are considered foundational components for economic growth, security, and technological innovation for any country. It also plays a very critical role in smartphones, computers, automobiles, electric vehicles, hypersonic missiles, nuclear power, aircraft, stock markets, e-commerce, and the banking sector. 

According to Craig Barrett, former chairman and CEO of Intel Corporation, semiconductor microprocessors are the most complicated inventions made by humans. 

Artificial intelligence and quantum computing kind of technologies are contributing to a rapid increase in the demand for chips.

The semiconductor industry broadly consists of four processes which include:

  • Raw Material Sourcing: It is created by adding impurities on the elements Silicon, Gallium Arsenide, and Gallium Nitride.
  • Research & Development: Semiconductor industry attracts the highest 23% of global research & development investments as the sector is predominantly dynamic. The USA spends the highest on making chips like many other sectors.
  • The Production Stage: The production stage is the most crucial and complicated stage of the chip-making process. It consists of designing, manufacturing and assembly, testing, and packaging. Integrated device manufacturers (IDM) are the companies that manufacture and assemble the chips by themselves only. For e.g. Intel and Samsung. Other than this, Fabless Foundry Model are the companies that design and sell the chips but outsource the fabrication to the manufacturing plant for cost-saving and efficiency. Qualcomm, Broadcom, Nvidia AMD are fabless companies set up in the USA. Taiwan’s TSMC and UMC, USA’s global foundries, and China’s SMIC are foundries companies.
  • Distribution and Sales:
    Finally, manufactured chips were transported to companies like Qualcomm, Nvidia, Samsung, TSMC. Here, the generated revenue decides the chip industry’s total revenue.

Worldwide, approx 1 billion chips were produced, meaning 130 chips per person. Hence, we can also say 21st century’s human beings are highly dependent on chips. Taiwan’s 15% GDP is dependent on the semiconductors industry only. Taiwan Semiconductor Manufacturing Company (TSMC)  is a world leader in manufacturing chips with 51% of the foundry market.

Along with this, the semiconductor industry is a highly vulnerable industry due to geopolitical disruption as the supply chain is highly complex and globalized. The sudden supply crunch in the semiconductor market due to lockdown and a huge rise in demand for electronic gadgets may strengthen the geopolitical tensions.

Impact on India:

Till now, India is highly dependent on imports for semiconductor chips and contributes a very negligible role in the semiconductor industry worldwide. The recent US-China rivalry offers India a bulk of opportunities to attract such companies for investment in India. India has the largest young population in the world which can be effectively utilized by skilling them with requisite data.

According to Ministry of Electronics and Information Technology data, in 2021, 20,000 engineers are involved in chip designing. In December 2021, the cabinet approved USD 10 billion (Rs 76000 crore) for the production-linked incentive scheme for the semiconductor industry and it will also result in 1,35,000 organized and unorganized jobs for youths. Other than this, the Government also plans to support 85000 semiconductor engineers and coordinate with the state government to build the required infrastructure for fabrication plants.

Nisha Upadhyay


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