A Globalized Market for Semiconductors?
The United States is not the only country looking to shore up its domestic production of electronic components and semiconductors. According to Swarajya, India’s Union Minister of State for Electronics and Information Technology Rajeev Chandrasekhar has announced a new government plan geared to the creation of $300 billion in electronics production by 2026.
“The Government is laser-focused on achieving the target of $300 billion electronic production by 2026. And for this, we have always emphasised on strengthening our domestic manufacturing ecosystem to make India more resilient to supply chain disruptions,” said Chandrasekhar.
Such news is only the latest in an industry that has faced such profound and prolonged chip shortages due to longstanding production bottlenecks (nearly all of the world’s supply of critical semiconductors comes from either Korea or, to a less extent, China) that other countries are seeing not just an opportunity to expand their own production, but domestic semiconductor production as a national security issue.
The U.S. has been the most prominent example of this trend, with President Biden recently signing a new bipartisan law that will create $50 billion in incentives for companies to manufacture microchips in on domestic soil. But it is hardly alone. Japan, for example, has made a series of bold moves to regain prominence in the industry — an industry they used to dominate — by investing billions of dollars in subsidies into its own domestic production partners. “The era where the world is at peace and it doesn’t matter who supplies our semiconductors is over,” said Kazumi Nishikawa, a director at Japan’s Ministry of Economy, Trade and Industry. Japan has also made a point to solidify supply chains with the European Union and U.S. in a kind-of coalition to better insulate the global supply chain from major risks.
Even emerging markets are looking at the environment and seeing an opportunity for growth. Vietnam, for example, anticipates that its own semiconductor industry will be valued at $6.16 billion by 2024, showing remarkable gains for the still burgeoning market concentrating on lower-valued components. Samsung has been the primary investor in this market, their most recent move being a $920 million investment into a electronic component plant in Thai Nguyen.
All of this positivity, however, must be looked at from a long-term perspective, with capacity not expected to increase in any drastic way until at least 2024. In the short term, inventory ownership solutions and last time buys through trusted third parties must be looked at by manufacturers as the primary means of maintaining business continuity.