Semiconductor Shortage 2.0?

Semiconductor Shortage 2.0

The ongoing tension between China-Taiwan and the US may severely impact the semiconductor industry. Let’s find out how it will affect India.

During COVID-19, companies from the automobile sector had to halt operations because of a shortage of semiconductor chips. Well, we all are aware of this. 

But because of the ongoing tension between China-Taiwan and the US, we could again be on the verge of a semiconductor crisis.  

You might be wondering how a conflict between these countries can impact India

Let’s find out. 

What’s Happening?

The current era we live in is quite globalised. Hence, what’s happening in Taiwan can impact us in no time. 

And when it comes to semiconductors. It is known to be the most crucial element without which your phone, laptop, cameras, televisions, washing machines, refrigerators, LED bulbs, and even your ATM and cars wouldn’t work! Yes, you can imagine how essential semiconductors are for us.

A semiconductor is that crown jewel that everyone wishes to have. But the country which owns it in abundance is none other than Taiwan!

Taiwan is a hub of semiconductors with about 65% market share worldwide. Out of this 55% is manufactured by a Taiwan-based company called TSMC. 

What Does This Mean For India?

Just as the Indian Automobile industry started to post some good growth figures, the tension between China and Taiwan began to blow up. 

Now, the biggest fear the IT and automation industry has is that the shortage of semiconductor chips could return. 

Under the ‘One China Policy’, China considers Taiwan part of its territory and wants to acquire it officially. Now the situation is such that any action against Taiwan can result in a global semiconductor crisis which would affect the overall supply chain. 

What’s Next?

During the pandemic, the auto sector was one of the sectors which took a significant hit. Car manufacturers struggled to get semiconductor chips. And then, when the second COVID-19 wave began, the situation got worse. The result was that India’s largest car manufacturer, Maruti Suzuki’s sales plunged by 19.2% YoY and sold only 1,09,722 units in November 2021, which was 1,35,775 a year back in November 2020.

As the current situation is concerned, if, under certain circumstances, Taiwan takes a hit in the production of semiconductors, then it will derail the auto sector from its growth path, and this will lead to a new stress cycle not just for India but also globally. 

That’s it for today. I hope you found this newsletter interesting.

Don’t forget to share it with your friends. 

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