Global Chip Shortage

The global chip shortage crisis is getting worsened due to the ongoing conflict between Russia and Ukraine. Earlier the prediction was made that the chip shortage would extend until at least 2023. This prediction was based upon the pandemic՚s effect along a component that has become a life-line for most of the gadgets in everyday use.

The global semiconductor market and the demand is projected to grow by 8.8 % to USD 601 billion being driven by a double-digit growth of the sensors and logic category along with the recent trends in automotive safety, electric mobility, and IoT.

About

• The growth of sales of laptops increased during the lockdowns to the highest in a decade.
• The laptop demands also increased due to shutting down of the schools and colleges.
• Due to the office work moving out of the office, the home networking gear, webcams, and monitors were snapped up.
• Many people picked up console-based gaming due to stay at home rules.
• Laptop like devices run on thumbnail sized semiconductor piece or even pieces sometime thereby performing various functions on a single device.
• The manufacturers produce them as 200 mm or 300 mm wafers.
• While the devices in high demand needed smaller diameter wafers, the larger wafers are expensive and mostly used for advanced equipment.
• Even before the pandemic began the manufacturing equipment required for making such wafers were in short supply with the industry moving in the direction of 5G which required the expensive wafers.
• Since the factories were closed during the lockdowns, high consumer demand for low-end products, coupled with large orders from tech firms shattered the chip makers.

Russia-Ukraine Impact on Chip Shortage

• Rare gases used for producing semiconductor fab lasers are supplied by Ukraine.
• Russia exports rare metals such as palladium for making semiconductors.
• Combination of rare gases and palladium is required for building chipsets that power a range of devices from automobiles to smartphones.
• The two largest producers of palladium are Russia and South Africa.
• Russia in 2021 supplied 2.35 million ounces of palladium.
• Russia besides palladium is also one of the leading producers of the other platinum group metals.
• It is to be noted that palladium could be substituted by platinum and rhodium.
• With Western sanctions, Russia՚s exports could be further disrupted leaving the semiconductors firms with limited options to source raw materials for making chip sets.

Semiconductor Chip

• An electric circuit with many components like transistors and wiring formed on a semiconductor wafer.
• IC or Integrated Circuit is an electronic device comprising numerous of these components and could be found in electronic devices such as:
  • Computers
  • Smartphones
  • Appliances
  • Gaming hardware
  • Medical equipment

India՚s Semiconductor Demand

• At present India imports all chips and the market is estimated to touch USD 100 billion by 2025 from USD 24 billion.
• An allocation of ₹ 76,000 crore by the Union Cabinet for supporting the development of a ‘semiconductors and display manufacturing ecosystem’ .
• The Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) has been launched with an outlay of ₹ 3,285 crore over a period of eight years.

Palladium

• As the metal is highly malleable and resistant to corrosion, it is often used as an alternative to gold in making various devices.
• While this metal is considered softer than gold it is still much harder and durable than the yellow metal.
• This metal is used in nearly all electronic devices and is a key to make chipsets and circuit boards.
• It is also used for making Multi-Layer Ceramic Capacitors (MLCCs) that are important for making:
  • Smartphone screens
  • Stereo systems
  • Power circuit breakers

✍Examrace Team at Jul 26, 2022