Time for Global Rescue: India and Taiwan may reach an agreement to build a $7.5 billion chip manufacturing plant.

By Chimniii Desk

Published: September 28, 2021

India and Taiwan met to explore a deal that would bring a $7.5 billion chip facility to India.

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India is in discussions with Taiwan to address the global semiconductor chip shortage. According to an exclusive Bloomberg storey, this could bring chip production to South Asia by the end of the year, along with tariff reductions on components used to make semiconductors.

According to Bloomberg, officials from New Delhi and Taipei met recently to explore a proposal that would bring a semiconductor plant worth $7.5 billion to India, which would supply everything from 5G devices to electric cars.

World leaders and executives at multinational firms have expressed concern about the global shortage of semiconductors, which has hampered manufacturing and sales in a number of countries, with no immediate remedy in sight.

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WHAT CAUSED THE SHORTAGE OF SEMICONDUCTORS?

Semiconductors, sometimes known as chips, have qualities that fall between between those of conductors and insulators. They are typically composed of silicon and are used to power a wide range of devices, including automobiles, laptop computers, cellphones, household appliances, and game consoles.

These tiny devices are responsible for a variety of tasks, including powering screens and conveying data. As a result, a supply shortage has an influence on sales of automobiles, refrigerators, laptops, televisions, and other electrical devices.

It is impossible to raise production on short notice. Making chips is a difficult process that takes months, according to a Bloomberg study.

Qualcomm, Nivdia, and Apple are among the company's customers. Taiwan Semiconductor Manufacturing Corporation (TSMC) is the world's largest contract chipmaker. It owns 56 percent of the chip manufacturing foundry business.

During the pandemic, there was a large demand for semiconductors due to the spike in electronic device sales. However, COVID-19 is not the only cause of the shortage.

Because many US corporations do business with Chinese companies, the strained relationship between the US and China is also an issue. The US government, for example, has placed Huawei on a no-fly list because of its ties to American chipmakers.

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WHAT ARE THE RISKS OF FAILURE?

Chip manufacturers take a long time to catch up with demand since production cannot be pushed at short notice.

According to a forecast issued by Gartner in May, the chip shortfall across device categories might last well into the second quarter of 2022.

“By 2021, the semiconductor shortage will have seriously disrupted the supply chain and will limit the manufacture of many different types of electronic equipment. "Wafer prices are rising, and chip companies are responding by raising device pricing," said Kanishka Chauhan, a Gartner principal research analyst.

According to a Bloomberg article, chip lead times, or the time between purchasing semiconductors and receiving them, reached a new high of 21 weeks in August, up from six weeks in July.

Automobile wholesales in India fell 11% year on year in August, according to figures from the Society of Indian Automobile Manufacturers (SIAM).

Due to a lack of semiconductors, Maruti Suzuki, India's largest carmaker, would slash production by 60% in September.

Due to the semiconductor scarcity, Mahindra and Mahindra M&M announced it will reduce output by 20-25 percent in September. During the month, the automaker will have seven "no production days" at its sites.

The semiconductor shortfall is also likely to have an impact on sales during the next Christmas season in India.

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WHAT ABOUT LAPTOPS, SMARTPHONES, AND SO ON?

The lack of semiconductors has also hampered the production of electrical products.

Apple CEO Tim Cook stated on a post-earnings conference call with analysts that "supply constraints will affect sales of iPads and iPhones." Cook stated that the shortfall is not in high-powered processors, but rather in “legacy nodes,” or chips that perform services such as driving screens or decoding music that can be created using older technology.

Samsung Group, South Korea's largest corporation, announced in August that it would invest 240 trillion won ($206 billion) over the next three years in biopharmaceuticals, artificial intelligence, semiconductors, and robots.

Many technology businesses have begun to develop their own chips, which will not only alleviate present supply difficulties but will also likely benefit the industry in the long run.