The rising demand for electronic gadgets and new technologies has contributed to the globally flourishing semiconductor market, as semiconductors form the backbone of the electronic and technical spaces. Semiconductors are used in consumer electronic devices (such as diodes, transistors, and integrated circuits), embedded systems, thermal conductivity, lighting and LED displays, solar cells, designing transistors, automobiles, and more. Due to their multiple applications semiconductors has a huge market that is monopolized by a few organizations at present and one of the finest way to exploit this opportunity is by conducting custom research in the semiconductor industry.
Global Outlook of the Semiconductor Industry Looks Bright:
Global outlook to the industry was studied by some prominent consultants including Deloitte, Boston Consulting Group, and McKinsey & Company. Further, KPMG LLP and the Global Semiconductor Alliance (GSA) conducted the 18th Annual Global Semiconductor Survey in the fourth quarter of 2022. The survey captures the insights from 151 semiconductor executives to tap the market outlook of the industry of 2023 and beyond. The stand of the experts is concise in the following paragraphs.
After a brief downturn in 2020, the semiconductor industry revived a bit post-pandemic. This was attributed to the impact of digital on lives and businesses. The sales boomed by more than 20% to $600 billion in 2021.
Rising inflation and interest rates, tech-led stock market retreats, geopolitical unrest, and lingering effects of the pandemic led to huge losses in market capitalization. The top 10 global chip companies combined market fell by 34% (from $2.9 trillion in November 2021 to $1.9 trillion in November 2022).
The short-term fluctuations and the long-term trends of the industry have shown consistent growth. The annual sales grew by 313% from 2001 to 2022 (from $139 billion in 2021 to $573.5 billion in 2022). Also, the unit sales of semiconductors increased by 290% over the same period.
The global demand for semiconductor manufacturing capacity is projected to increase by 56% by 2030. The annual growth of the industry could average from 6% to 8% a year up to 2030.
Sectors that are expected to show the highest demand:
The automotive industry accounted for just 8% of semiconductor demand in 2021. However, the segment could represent 13% to 15% of demand by the end of the decade, thus, being responsible for 20% of industry expansion in coming years.
Growth of 4% to 6% is estimated in the data- storage and computation market. Meanwhile, smartphones would account for growth in the wireless segment amid a shift from lower-tier to mid-tier segments in emerging markets and backed by growth in 5G.
Experts’ Suggestions:
- Construction of more manufacturing industries in diversified locations and the expansion of existing facilities.
- Management of diversification risk and challenges caused as a result of localization and friend shoring
- Process transformation, digitization, and automation are recommended in departments like financial planning, operations, and supply chain.
- Manpower management in terms of recruitment of industry experts and training and development of existing workforce.
- Alignment of the industry with national and global policies and changes and adoption of environment-friendly and sustainable practices.
Crises and Challenges faced by the industry
- Supply chain disruptions:
Although the disruption is blamed on the pandemic the problem began far back. In 2019, Intel (one of the leaders in microchip manufacturers) started facing difficulties in the supply of processors led to a change in their manufacturing process. The heart of the problem was market concentration. As per Gartner’s Report of 2020, 33% of the industry was monopolized by Intel, Samsung, and SK Hynix. Additionally, according to Deloitte 60% of the microchip production is concentrated in Asia (mainly in South Korea and Taiwan), which was among the first to be hit by the pandemic.
The pandemic just worsened by the scenario. Although, the estimated growth of 6% in the demand for semiconductors contracted by 10%, their demand for computers increased by 11% which was forecasted as zero.
- Technological Complexities and Miniaturization:
Moore’s Law predicts the doubling of transistors on a microchip every two years. This helps in the manufacturing of compact yet powerful devices. However, it poses design, fabrication, and testing challenges for manufacturers. Where designing requires extensive research, engineering expertise, and software tools, fabrication involves intricate techniques like photolithography and etching. Each technological advancement requires thorough research, substantial investment, and adequate manufacturing facilities. Additionally, these complex designs are leading to longer manufacturing cycles. Such complex processes increase the possibilities of occurrence of defects and the mitigation of these defects further adds up to the cost and time.
- Talent Shortage and Skill Gap:
At present, the semiconductor industry is struggling on three fronts: talent acquisition, retention, and organizational health. In a report, Deloitte highlights a requirement of more than one million additional skilled workers by 2030 to meet the demands of the semiconductor industry. This equates to more than 100,000 professionals annually. According to a study conducted by McKinsey & Company, 300,000 engineers and 90,000 skilled technicians would be required by the US alone. According to a report by Semicon India Future Skills Talent Committee set up last year, India will need 1,200,000 manpower in this industry by 2032 The problem can be addressed by developing new talent pipelines proficient in analytics and tools, partnership with educational and government institutions, and better employee experience overall.
The semiconductor industry is thus bound to grow over the years. The main concern for the strategists and government have to be structural and sustainable growth. The industry strongly needs a team of experts and researchers due to the demanding technological complexities. Various nations around the globe have initiated custom research on various aspects of the industry including but not limited to structural analysis, supply chain, international trade, shaping of constructive government policies, entrepreneurial and organizational developments, vertical integration, and atmospheric developments, thus enlightening the future of the industry.
Latest Updates of the Semiconductor Industry:
- Sahasra Semiconductor, Rajasthan to begin chip production in 2023:
In a recent interview with Financial Express, Mr. Varun Manwani (CEO of Sahasra Semiconductor) confirmed the commercial production of the first made-in-India memory chip from September or early October. The semiconductor assembly, test, and packaging unit is set up in Bhiwadi district. It will initially package basic memory products like MicroSD cards and chip-on-board and will later move on to advanced packaging of products such as internal memory chips. Sahasra is an Outsourced Semiconductor Assembly and Test (OSAT) company, i.e. they assemble and package chips for other brands. The company is a part of the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and is eligible for a 25% financial incentive on capital expenditure.
- Micron to set up first semiconductor facility in Gujarat:
Union Minister for Railways, Electronics, IT, and Telecom, Mr. Ashwini Vaishnaw, confirmed that US- US-headquartered Micron Technology with set up its semiconductor facility in Gujarat. The first made-in-India semiconductor chip from the plant will be produced in 18 months, i.e., December 2024.
- AMD to invest $400 million in India by 2028:
AMD is planning to build its largest design center in Bengaluru. Chief Technology Officer of AMD, Mr. Mark Papermaster confirmed that AMD will open its new design Centre campus by the end of 2023 and create 3000 new engineering roles in the next 5 years.
- Government to spend $1.30 billion to modernize Semiconductor Laboratory (SCL), Mohali:
According to an article in the Economic Times, the government plans to invest $1.25- $1.30 billion to modernize and upgrade its semiconductor industry. The expenditure by the Ministry of. Electronics and IT will come from the government’s $10 billion semiconductor incentive package
- SemiconIndia 2023:
India Semiconductor Mission in partnership with industry and industry associations under the leadership of PM Narendra Modi was inaugurated on 28th July 2023 in Gandhinagar, Gujarat. Companies such as Foxconn, Micron, AMD, IBM, Marvell, Vedanta, LAM Research, NXP Semiconductors, ST Microelectronics, Grantwood Technologies, Infineon Technologies, Applied Materials, and others participated in the event.
- ISMC’s $3 million investment in chip making in Karnataka, India has been stalled:
ISMC’S $3 billion chip-making facility plans are currently on hold subject to the acquisition of Towers by Intel for $5.4 billion, last year. The deal is pending for regulatory approval.
- Recent trends in the Semiconductor Industry:
The semiconductor industry is integrating digital tools and artificial intelligence, fabrication technologies, and novelties in material design to drive innovation. Also, more and more companies are focussing on in-house chip production as a measure against the chip shortage.
- US-China battle of silicon chip supremacy:
The US and its South Asian allies like Taiwan, South Korea, Japan, and the Netherlands have dominated the semiconductor industry for years. Thus, the Biden administration is determined to stop Beijing from developing its chip industry and thereby challenging U.S. hegemony.
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