Elements that combine the characteristics of conductors and insulators are known as semiconductors. They serve as the foundation for all modern world electronic devices. Semiconductors comprise compounds like gallium arsenide or pure elements, primarily silicon or germanium. They are often referred to as microchips or integrated circuits (ICs). In the current digital era, the loss of semiconductors would be catastrophic due to our heavy reliance on electronic devices.
Semiconductor devices have become ubiquitous. They are extensively used in industrial, personal, communication, and military applications. Consider a hypothetical scenario in which semiconductors are non-existent. Some events could include the following: In addition to preventing you from watching your favourite TV programs, a nation’s security and defence would be seriously jeopardised. The global economy would likewise be significantly impacted by their disappearance, with prices rising and GDP declining. Among other industries, this would suspend operations in the transportation, IT, and automotive sectors. The comfort that digitisation has brought us will abruptly disappear. Distance will once again become a significant barrier, and we will be unable to communicate globally. All the considerable advances in medicine will suddenly become futile. AI will become obsolete once chips disappear.
During the Pandemic-19 lockdown, there was a rise in demand for electronic gadgets. However, it also highlighted the industry’s shortcomings in production localisation because of transportation limitations, factory closures, etc. As a result, the automobile sector suffered greatly during the pandemic as its chips were diverted to meet the heightened demand for smart devices. It simultaneously created opportunities for expanded production and dissemination in the IT sector.
With the leading semiconductor companies based in Japan and Taiwan, South East Asia has emerged as a semiconductor manufacturing powerhouse due to several factors, including creating a manufacturing environment, government support and incentives, a skilled labour force, and the cost-effectiveness of the workforce. Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest semiconductor manufacturing company, is in Taiwan. However, Japan leads the world in material access, whereas the US is leading in chip design.
The current geopolitical climate has significantly impacted the semiconductor sector. Supply networks have been disrupted by escalating hostilities, such as the Israel-Hamas conflict and the Russia-Ukraine war. Several nations are starting programs to produce chips locally to lessen their reliance on others. Increased trade tensions, a race to expand domestically, and technological developments are all happening between the US and China. Trade in semiconductor information and technology is controlled by trade restrictions imposed by the United States on China. The Biden government passed the CHIPS Act in August 2022 to reduce its need for imports and vulnerability to supply interruptions and protect the semiconductor manufacturing process from sabotage. Two months later, the White House announced a set of penalties and regulations to preserve American intellectual property, protect national security, and prevent Beijing from obtaining or creating advanced chips.
A Cautious & Calculative China
China has been developing its technology to lessen its reliance on the United States for nearly ten years. Additionally, due to security concerns, China has banned importing products from American memory chip manufacturer Micron for its infrastructure and other domestic industries since May 2023. A conflict between China and Taiwan will significantly impact the semiconductor industry and the world, much like the effects of war and sanctions on oil and energy supplies caused by the Russia-Ukraine crisis in 2022. This is primarily because TSMC produces over 60% of the world’s semiconductors. Thus, in addition to bringing the US and China face to face, a battle between Taiwan and China would have catastrophic consequences for international security.
China claims that Taiwan has historically been an integral part of its territory. Additionally, it is attempting to seize complete control of Taiwan by utilising the nine-dash line theory. China would have a significant technological edge over the rest of the world, particularly the US, if it controlled Taiwan. China’s occupation of Taiwan would deprive the US of a regional strategic edge, as the US is Taiwan’s main ally. This would also allow China to influence numerous businesses and nations that rely significantly on Taiwan for technological needs.
Due to the wide range of uses for semiconductor chips, supply chain resilience has become a crucial strategic goal. Therefore, nations are emphasising self-sufficiency and developing programs to boost domestic production, particularly in light of the epidemic and the recent global instability brought on by two major conflicts. Research and development (R&D) and semiconductor manufacturing are being funded by several countries, most notably the US and China. Countries that produce semiconductors may find it easier to control the supply chain, grow their economy, draw in foreign capital, and create high-tech jobs.
Indonesia, Malaysia, and India are among the emerging economies positioning themselves to capitalise on the opportunities presented by shifting global conditions. After decades of technological outsourcing by individual companies, the United States signed the Creating Helpful Incentives to Produce Semiconductors Act (CHIPS) in August 2022 to promote the restoration of microchip production in the country. Around $53 billion has been granted by the US government under this act; this includes a $6.6 billion subsidy for TSMC’s US unit for semiconductor production in Arizona.
Additionally, India is actively luring companies to invest in the country and is seeing progress in developing domestic semiconductor testing and assembly facilities. According to the Ministry of Electronics and Information Technology, Government of India, in December 2021, the government approved a ₹76,000 crore incentive program to boost semiconductor manufacturing. A ₹27,000 Crore semiconductor unit by Tata Semiconductor Assembly and Test Pvt Ltd (TSAT) in Assam is slated for completion in mid-2025. This will be a monumental step forward for India’s semiconductor ecosystem.
Foxconn and Saudi Arabia have teamed up to create a semiconductor manufacturing plant. Japan is now home to TSMC’s first production plant. According to reports, Intel plans to construct two semiconductor facilities in Germany.
A few substitutes for semiconductors include organic semiconductors, silicon carbide, gallium nitride, nanomaterials, quantum dots, and two-dimensional materials. Compared to silicon semiconductors, these are more environmentally benign and sustainable. Traditional Si-based devices contain hazardous and non-recyclable components and generate hazardous byproducts; thus, processing them might be difficult. However, producing these alternative semiconductors is highly costly and complex, even though they are more efficient than silicon-based semiconductors.
