India May Sideline China as Talks Underway With Taiwan to Overcome Domestic Chip Shortage
12:51 GMT 27.09.2021 (Updated: 13:32 GMT 27.09.2021)
The global semiconductor shortage has hit the automobile industry hard, forcing manufacturers to either cut output or temporarily halt production. Maruti Suzuki, India's largest carmaker, has reportedly seen a 60 percent cut in production in September as a result.
Amid the global shortage of semiconductors
, Bloomberg reports that India and Taiwan are in talks to set up a chip manufacturing plant in South Asia before the end of this year. The chip plant – worth an estimated $7.5 billion – will scale up India's supply for 5G devices and electric cars.
Semiconductors play a vital role in the global supply chain, and the Taiwan Semi-Conductor Manufacturing Company (TSMC) is the world's largest third-party chip manufacturer. Holding over 55 percent of the foundry business of chip manufacturing, TSMC's customers include Qualcomm, Nvidia, and Apple.
Last week, after Taiwanese officials attended a meeting in the White House, the country announced that it's "actively" working with all stakeholders to address the global semiconductor shortage.
The chips are usually made of silicon and perform a wide variety of functions including power display and the transfer of data. A chip shortage can grind the production of cars, fridges, laptops, TVs, and a host of other electronic devices to a standstill. According to a Bloomberg report, the manufacturing of these chips cannot be increased at short notice because it takes months to make them.
"TSMC has been a strong partner in this effort, taking unprecedented actions to address this challenge. We are confident that our capacity expansion plan including the advanced 5nm semiconductor fab in Phoenix, Arizona – one of the largest foreign direct investments in U.S. history – will enable us to support the industry in driving long-term stability in semiconductor supplies," TSMC said in a statement.
In India, the dearth has led to a delay in the launch of a new smartphone by billionaire Mukesh Ambani’s Reliance Industries Ltd. that has been co-engineered with Google. According to media reports, India imports almost all of its semiconductors to meet demand, which is set to surge to around $100 billion by 2025 from this year's $24 billion.
New Delhi is also reportedly looking into possible locations for the plant and will put up 50 percent of the project's capital expenditure from 2023. Meanwhile, Taiwan is "demanding" reduced tariffs on the raw materials used for making semiconductors.
The discussions come weeks after US President Joe Biden sought increased supplies of chips
Last week, the Quad' partners – the US, Japan, Australia, and India – launched a joint initiative to map capacity, identify vulnerabilities, and bolster supply-chain security for semiconductors and their vital components.
"This initiative will help ensure Quad partners support a diverse and competitive market that produces the secure critical technologies essential for digital economies globally," the statement issued by the White House read.
Due to the ongoing pandemic, the world is witnessing a scarcity of semiconductors, which has affected manufacturing and chip sales in several countries. Reports suggest that soured relations between the US and China are also responsible.