The fate of chips will decide the fate of nations

Source– The post is based on the article “The fate of chips will decide the fate of nations ” published in The Hindu on 10th October 2022.

Syllabus: GS3- Economy

Relevance– Chips and semiconductor manufacturing

News- The article explains the reason behind increasing dependence on chips. It also tells about the factors that need to be considered by India in case of chip manufacturing.

Why has chip manufacturing gained the attention of the world?

They are very small in size. Apple’s new A16 chip has 16 billion transistors on it. Apple chips are mostly outsourced. Even a large company like Apple is not able to manufacture chips on its own. Besides, it is manufactured by very few countries like the USA, Taiwan.

Russia was not able to dominate Ukraine through war. Ukraine used precision-guided missiles powered by chips. Russia had a lack of these missiles due to unavalabilty of chips.

Toyota has to temporarily shut down its plants in Japan due to a shortage of chips.

Critical sectors such as defence, telecom and mobility are impacted by chip shortages. It would not end by 2023. Natural disasters in South Korea and Taiwan could worsen the crisis.

Further the $200 billion investment put up by countries in chip making will not give instant results.

If China attacks Taiwan, it could disrupt the entire supply chain.

What factors need to be considered by India while putting investment in chip manufacturing?

India should be cautious. Previous attempts by Vietnam, Brazil and the USA have not yielded desired results.

Chip manufacturing requires a steady supply of electricity and billions of gallons of clean water.

A chip manufacturing plant costs around 15 to 20 billion dollars. It takes time to make it profitable. Further the supply chain disruption by COVID-19 and the Ukraine war has complicated chip manufacturing.