Hello Guys The Semiconductor Crisis is among the most serious economic problems. This issue has been threatening the world economy for over a year. Apple lost $6 billion in revenue, and Maruti had to cut output by 60%.
Mahindra had to slash 20% of its output, and the car sector as a whole has already lost $100 billion in sales. due to chip shortages and India being one of the world's largest and fastest-growing electronic marketplaces
Semiconductor Crisis In World
Because of the crisis, our economy is once again susceptible to a major danger. How could the semiconductor situation become so severe?
In this circumstance, what approach is the Indian government employing to become an abortionist?
Most importantly, as stock market investors, what factors should you keep an eye on to comprehend the impact of a Semiconductor Crisis just on the stock market?
Let's start with the fundamentals for individuals who aren't engineers. A Semiconductor Chip is essentially the brain of any electronic gadget, and they are in charge of carrying out every tiny operation in modern electronic devices and automobiles, for example:
In your mixer, the the motor's speed is controlled. In a car, there are 100s of Semiconductors that manage everything from keyless access to automatic dosage and even engine operation.
Today, In this Digital Era, Semiconductors are the most critical components which keep the place running, from smartphones to the world's largest servers.
They are just as crucial, if not more so, than the internet itself, so why is there a sudden scarcity of Semiconductors? And how does it affect various industries?
A first reason for this shortfall is that the sector had already been developing at such a quick rate that it was on the verge of becoming overcrowded.
Semiconductor Industry
In accordance with the Semiconductor Industry Association, over 100 billion integrated circuits are used globally every day.
It is literally equivalent to the number of stars in our galaxy's corner. This market is so large that even with industry titans such as Intel, Micron, Nvidia, and Qualcomm, there is not enough supply to meet the increasing demand.
As a result, when the epidemic struck on one side, the desire for electronic gadgets exploded on the other. On the other hand, due to the temporary stoppage of industries and transportation services, demand far outstripped supply capacity.
The reason for the difficulty in recovering from this scarcity is that making a microprocessor normally takes more than 3 months and includes large factories, dust-free rooms, multi-million dollar machinery, molten tin, and lasers.
Because production cannot be expanded on such short notice, chip wait times are increasing at an alarming rate, rising from 11.8 weeks in September 2019 to 21 weeks by August 2021.
Meanwhile, Statista estimates that the Semiconductor Sector, which was already worth 440 billion in 2020, would increase to 550 billion in 2021 to reach 600 billion by early 2022. Learn More: The Rise Of Esports: Evolution Of Esports Industry
This huge mismatch in demand and supply is the reasons why enterprises from all over the world in many sectors have begun to experience production problems.
The car sector, led lighting industry, consumer electronics industry, and appliance industry are the four primary industries facing pressure.
While Ford and GM have been severely impacted in the United States, in India, as recently as the second quarter of 2022, Maruti could not build an estimated 1.16 lakh vehicles owing to a chip shortage.
This is why Maruti's output in consumer electronics was nearly 60 percent lower in September, right before the Christmas season in India.
While HP hiked the price of the its printers by 20 % in a single year, Sony stated that adequate supply of its PlayStation 5 system will not be available until at least 2022.
Similarly, a big number of enterprises have been severely impacted by the World's Semiconductor Scarcity; this is when many nations, including India, recognize how critical it is to become a part of a Semiconductor Ecosystem.
It is past time for us to reduce our reliance on other nations just by becoming buyers of Semiconductors, therefore the issue is, what is India's position in the Semiconductor Industry, and what is government doing it to de-risk?
this scenario The bad news is that, despite the presence of Intel, Micron, and Samsung in India, we have nothing substantial in chip production.
Especially when considering India's semiconductor trade position While we exported 425 million dollars in 2020, we imported 10.59 billion dollars in 2020, and with a booming electronics industry, our semiconductor imports increased by 100 percent from 5.2 billion dollars in 2016 to 10.59 billion dollars in 2020.
The frightening thing is that almost 40% of our imports come from China, with the remaining 26% coming from Hong Kong, but we all remember how China is notoriously attempting to gain control of Hong Kong.
As a result, India, like solar wafers and ingots, is subject to additional semiconductor shortages, which might cost us billions of dollars.
So the issue is, what is India doing to correct the problem and reduce its reliance on China? The solution is found in something known as the quad summit.
It was a leaders summit conducted by President Biden on September 24, 2021, and the agenda was to debate how to address the many economic difficulties of individual countries, one of which being the global semiconductor shortage. Learn More: Hidden Startup Secrets Of Mensa's | Mensa's Business Model
I'm not sure how many of you had felt this way, but whenever I hear terminology such bilateral summit or presidents & prime ministers meeting, I frequently wonder what the outcome of these gatherings is.
Despite the fact that these meetings are crucial to our country's economy, no one ever educates us about them in schools or universities.
So, here's a brief rundown of what happened at the quad summit so you're aware of these vital international policies, as well as the role of our country as well as the contribution of a administration you chose.
So, in a nutshell, chip production is a complicated process that necessitates several phases; therefore, if each nation establishes 5 divisions for 5 separate procedures, it is both expensive and time consuming.
As a result, India, Australia, Japan, and the United States have resolved to collaborate to execute just those procedures in which they excel and pass the rest on to other nations, such as:
The United States is a global leader on semi-conductor design, and American businesses also dominate in electronic systems engineering and licensed intellectual property. Japanese companies dominate in semiconductor materials and chemicals needed in chip manufacture.
Japan is also a world leader for silicon wafers and substrates, which are used to make integrated circuits. Similarly, Australia plays an essential role in the larger electronic supply chain due to its availability to crucial minerals and superior mining skills.
The semiconductor design requires a large number of experienced engineers and labels, which is where India comes in. At the quad summit, Australia, the United States, Japan, and India joined together to develop a robust semiconductor distribution network based on particular capabilities.
Their reliance on China, Taiwan, and Hong Kong is shown by India's 76,000 crore manufacturing lint incentive scheme, under which the federal government of India intends to develop 20 semiconductor plants in the nation over next two years.
The issue is, how does this work out now? Pay close attention since you'll need to conduct some stock market study on this to deal with the semiconductor shortage & de-risk India from China.
Because of pli land, the government has put up an attractive remuneration support for enterprises engaged with silicon semiconductor fabs, display fabs, compound Semiconductors, silicon photonics sensors fabs, semiconductor packaging, and Semiconductor design.
Semiconductor grade water, electricity, logistics, and a research ecosystem will be offered at discounted prices to these enterprises in order for them to establish two greenfield Semiconductors production plants & two display fabs in the nation.
You could uncover some hidden stock market jewels there, public listed firms that will profit from these incentives. Long story short, all of the new government plans revealed are projected to contribute to a one trillion dollar digitalization by 2025-26.
It plans to produce up to 128 billion dollars in the next 20 years, with exports estimated to total 68.97 billion dollars.
If this happens, combined with the effective implementation of a quad summit accords, India will undoubtedly become a Semiconductor hub, and we will be less reliant on China for this.
This is how India intends to transition from being a Semiconductorr importer to a significant supplier of Semiconductors in the global market, which leads me to the most crucial section of the piece.
That is, as stock market investors and, more crucially, as Indian citizens. What are the things to watch in order to understand the path of India's Semiconductor Market? What are the greatest resources for learning more about it?
Indian Semiconductor Business Study
The Three Most Significant Aspects To Consider While Studying The Indian Semiconductor Business Study
1. Keep a careful eye on the government's production-linked incentive program and determine which of the publicly traded firms may benefit from this incentive scheme, even if the government has already sought to rule out tempting subsidies.
It failed, therefore, conduct some research to figure out why and if you know what happened.
2. The solution to this a comment below regarding the same number two India is now collaborating with Taiwan which is now vehemently resisting the Chinese takeover, and India is having this collaboration to create Semiconductor plants.
It is significant in India and Taiwan since Taiwanese contract manufacturers contributed for more than 60% of total worldwide foundry revenue last year.
It is not an exaggeration to suggest that the world's reliance on Taiwan for Semiconductors is alarmingly high.
3. Keep a close eye on the Quad Summit summary report and how it affects the Indian economy.
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