Constant increase in the difficulties of large scale industries due to small chips

- Given the current coincidences, chip shortages are likely to increase in the near future.

Increased friction between the US and China has put the global semiconductor (chips) industry in trouble. This adversity has affected not one but many industries. Chips are a must have, for any Affiliate, promoting any program. Chips are needed to produce everything from automobiles to airplanes and cars to mobiles. Given the current state of the semiconductor industry, this adversity is likely to continue in the near future.

There are mostly three types of companies in the chip industry. The first category includes companies that design and manufacture chips themselves. The second category of companies only do chip design work, while the third category is companies that only make chips. Companies like Intel come in the first category, while Qualcomm and Nvidia mostly chip design. Taiwan's TSMC is one of the chip fabricators that does not design the chips itself but manufactures them for everyone from Apple to Huawei.

Previously, America dominated both chip design and fabrication, but over time its reliance on outside fabrication companies increased rapidly. It is now offering billions of dollars in incentives to set up state-of-the-art chip manufacturing centers across its borders. Europe and Japan are also lagging behind in chip manufacturing. Companies like Samsung and SK Hynix in South Korea have state-of-the-art chip fabrication centers, but they are in trouble because they have large customers in both the US and China.

The problem with China is that it has a U.S. presence in the design of the chip. And lags behind Taiwan, South Korea and the U.S. in terms of the latest manufacturing. With China now spending billions to become self-sufficient, the U.S. has committed to restricting China’s access to both the design and fabrication of the chip but it could take years to develop chip production capacity locally.

Since 2013, the United States has been making systematic efforts to block access to China's latest chip and chip technology. It previously barred American companies or any company using American technology in chip production from entering into any partnership and business with Chinese telecommunications equipment maker Huawei. These restrictions have increased since then. In addition, the United States refused to provide the technology to Chinese semiconductor maker SMIC and barred the Netherlands-based ASML from providing the equipment needed to set up a chip manufacturing plant. In fact ASML is the only company in the world that manufactures such a machine.

This global game could result in an increase in chip shortages over the next few years. As well as can increase the prices of chips because, the production of chips in the US, Europe or Japan is much more expensive than the chips produced in Taiwan or China. India has so far failed to get any company to set up a state-of-the-art fabrication plant. The main problem has been that the fabrication plant requires billions of dollars of investment, a constant supply of electricity and water. It has been repeatedly rejected by international fabrication companies after assessing India as an alternative to their plant.

There is an option to invest in existing fabrication companies in the US and South Korea. Another option could be to enter into long-term agreements with fabrication companies outside of Taiwan. But if India aspires to be a major global hub of manufacturing and technological innovation in the future, it is imperative to set up such a plant.