Wafers, chips and how India sees a slice of the semiconductor pie

Some call it the “heart”, others the “brain” of modern gadgets. Either description serves to illustrate the central role semiconductor chips play in making life easier, driving economic activity, and fostering innovation for the digital future. But for something the entire world relies heavily on, the semiconductor production ecosystem is surprisingly, some would say, alarmingly small, with only a handful of countries with the capabilities to design or manufacture them. Amid the pandemic, a chip shortage has seen production suffer across all industries, underscoring the need to diversify production of this vital item. Seeking to become a major player in semiconductors, India has put together a package of Rs 76,000 crore to attract know-how and investment in the sector. Here’s all you need to know.

Why are semiconductors important?

Never before has such a small object had such a massive influence on world affairs as semiconductor chips have in our digital age. Most electronics and new cars being produced use it to perform their functions, while everything from gym equipment to game consoles depends on it, not to mention most home appliances and personal devices.

In short, any device, gadget, item or product that has electronic displays or needs to process data is basically dependent on these chips. The industry, which posted total sales of $ 440.4 billion in 2020, is expected to see profits increase by a fifth this year to $ 527.2 billion. This, amid an overwhelming chip shortage that will see automakers around the world producing millions less cars this year, while electronics giant Apple has said the shortages will hurt iPad sales and iPhone this year.

What is a semiconductor?

It all comes down to the electrical properties. Anything that conducts electricity is called a conductor, and anything that does not is called an insulator. “Semiconductors are substances whose properties lie with one another,” explains Japanese major Hitachi.

Such as they are, according to the American industrial organization Semiconductor Industry Association (SIA), “semiconductors are the brains of modern electronics … and technologies of the future such as artificial intelligence, computing quantum and advanced wireless networks “.

How are they made?

Semiconductors – also known as integrated circuits (ICs) or microchips – are most often made of silicon or germanium, or a compound like gallium arsenide. The process begins with the introduction into these pure elements of impurities in order to obtain crucial changes in the conductivity of the material. This step is known as doping.

As the SIA says, most semiconductors start with sand which, after being processed, is melted into solid cylinders called ingots. These ingots are then sliced ​​into discs of extremely thin pieces, which in turn are “polished to a crisp finish”. stage where they become separate chips, which occurs by slicing them into tiny individual semiconductors called chips.

The arrays are then embedded into finished semiconductors and take the familiar shape in which they are ultimately inserted into devices.

This was the mechanical part of producing a semiconductor chip and is accomplished in what is called a foundry. But the real art of semiconductor chip manufacturing lies in their design and design, involving all of the operation of the chip, how the circuit should be laid out to achieve that goal, and including testing and verification to verify that the chip does what it was supposed to. to be.

A single company that does all of the above steps is called an Integrated Device Manufacturer (IDM), but most of the business operates through a system where what is called a “factory without a factory” designs the system. puce, then subcontracts its production to a foundry.

Fabulous companies are most often located in developed countries which can afford high investment in R&D, while foundries are more likely to develop in countries with abundant and cheap labor in order to keep production costs low, like Taiwan, the world’s largest chipmaker. – and China.

What caused the shortage of crisps?

Mainly Covid, as the pandemic it sparked disrupted economic activity, closed factories and businesses, and froze global supply chains.

As the tech major IBM pointed out, the sudden surge in remote-work-induced consumer electronics sales was a double whammy in combination with a slowdown in chip production. But as a Money Control article notes, Covid-19 was not the only factor behind the shortage and “the strained relationship between the United States and China” also played a role. As the United States blacklisted Chinese companies, American companies had to look elsewhere. crisps, which also served to trigger shortages.

The sudden chip crunch and the debilitating impact it has had on all kinds of industries – The Washington Post said that a company in Illinois in the United States that also makes electronic dog washing booths has also hit by the shortage – rocked strategy and politics. circles, sparking efforts to resolve supply chain issues and bottlenecks. The idea was to make sure that no country plays a disproportionate role in the semiconductor industry.

With China’s increasingly assertive stance vis-à-vis Taiwan, which Beijing sees as part of its territory, there has been a further push to diversify chip production. So much so that one of the stated objectives of the Quad Alliance of the United States, Japan, Australia and India is to “launch a joint initiative to map capacity, identify vulnerabilities and strengthen supply chain security for semiconductors and their vital components ”.

Where does India stand in the production of semiconductor chips?

According to a March 2021 article on indiaai.gov.in, an initiative of the Ministry of Electronics and Information Technology (MeitY) and Nasscom, “semiconductors are a 100% import sector” in India. However, he noted that India “has a distinct advantage in chip design” with several global IDMs having established design centers in India. He quotes MeitY to add that “India produces nearly 2,000 chips every year and over 20,000 engineers nationwide are involved in chip design.”

But India is still nowhere on the global semiconductor radar. As the SIA notes, the United States is the world leader in semiconductors with about “half of the global market share and sales of US $ 208 billion in 2020”. five global leaders: Intel, NVIDIA, Broadcom, Texas Instruments Inc. (not in that order) – and the Asia-Pacific region, where South Korea is home to one of Samsung’s top five players.

The reason why the semiconductor industry “is dominated by global giants” is partly due to “the enormous scale of the market and the costs of manufacturing integrated circuits and researching new technologies”, adds the IEEE.

MeitY told Parliament in December this year that “semiconductor FABs are very capital and resource intensive, and are at the cutting edge of manufacturing with rapidly changing technology cycles.” available with only a few companies

at the World level”.

How is India seeking to increase its semiconductor capacity?

On December 15, the government offered a package of Rs 76,000 crore “for the development of semiconductor and display manufacturing ecosystems in India”, announcing incentives of Rs 2.3 lakh crore “to position the ‘India as a global hub for the manufacture of electronic products with semiconductors as the basic building block.

Stating that building national capacities in semiconductor production “will have a multiplier effect in different sectors of the economy [and] promote a higher national added value in the manufacturing of electronic products “, he said that success in this field” will contribute significantly to the realization of a digital economy of 1000 billion dollars and a GDP of $ 5,000 billion by 2025 “.

The program aims to boost semiconductor and display manufacturing by enabling access to capital support and technology collaborations for companies engaged in the production of everything from semiconductor factories to silicon, display factories, validation, assembly and testing and design.

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