Back in 2021, international chip production slumped to such a large extent that it almost stopped automotive and consumer electronics production lines. This continuity was negatively impacted by the disruptions caused by the coronavirus pandemic and are still affecting those industries, which are completely dependent on chip technology. Over the past years, industry leaders, governments, and global chip firms have undertaken various efforts to boost chip productions by unleashing various schemes, investments, and unleash of new technologies. But, research reports are providing an unclear picture of the growth in revenue. Some of them have mentioned that the sector witnessed a growth, while others have opined the opposite. In this regard, Priyanka Panhale, Senior Consultant, ICT Practice, Future Market Insights Inc in an exclusive interaction with CircuitDigest highlighted about the semiconductor industry's current challenges, the solutions required to boost the sector, the current growth and production lines, and various other industry aspects that will take the global semiconductor industry forward.
Q. During COVID, the major challenges were production slump, supply chain disruptions and many more. But, what do you think are the current challenges, which need to be tackled soon so that production growth can be revived soon?
The pandemic demonstrated how connected the world is at this moment. The networks of people, businesses, and modes of transportation that order and manufacture items and get them to warehouses, stores, or even directly to our doors, have been disrupted by several bottlenecks. I'd say that as living expenses have increased, workers have also demanded salary rises to offset the effects of inflation on their pay cheques. A household's ability to afford food has been severely impacted by factors like inflation. Consumers' anticipated need to make significant spending cuts has created uncertainty in the market for goods and services.
This makes it challenging for supply chain planners to predict in advance the precise quantities and types of items that consumers are likely to require. This picture has already been significantly altered by the pandemic, but in the next few years, forecasting demand will be much harder. Owing to the rising cost there is also a labor rest, which is adding up the pressure on the supply chain. Many workers across industries are striking for various reasons, which could cause further disruption to supply chains. Coupled with increased e-commerce demand since the start of the pandemic, operations are becoming increasingly strained for many businesses.
Q. As per a global research report, Global Semiconductor Revenue Witnessed a Growth of Only 1.1% in 2022. Do you agree with the statement? If not, where do you think the global growth and production currently stands and also how is India moving with the growth?
I would say I agree that the global revenue will see a growth of 1.1% in 2022. However, this is an increase in the number compared to last year which was around $600 bn. But in all there is a decline owing to the uncertainty of the global economy and surge in the demand of consumer electronics. Combining the growth of global 20-25 semiconductor businesses the market witnessed to be climbing with approx. rise by 3%. In addition, major vendors contributed the majority of the market revenue about 70%.
Q. Advanced semiconductor packaging is gaining huge prominence internationally, but there are certain technical and market challenges like investment and skilled workforce, claim reports. How would you highlight the importance of packaging and what are the requirements to boost the sector?
Advanced packaging facilitates semiconductor businesses to bundle mature and leading-edge chips in an integrated system for applications that need both types, eventually resulting in lowered costs. One trend that we see is called heterogeneous integration, is empowering companies to combine multiple smaller chips rather than producing a single giant one. Heterogeneous integration may result in significant cost savings because larger chips frequently have poorer yield, with the decline typically increasing with chip size. In 2020, the advanced packaging market was estimated to be worth $18bn, and by 2026, it is predicted to be worth more than $40 billion, accounting for around 40- 45 % of packaging sales. Although cutting-edge IDMs and foundries are responsible for the advancements in packaging, innovative approaches also open doors for other participants along the value chain since they increase demand for new supplies and machinery.
Q. The government of India has already unleashed Rs 76,000 crore PLI schemes for semiconductors and there are additional schemes like SPECS to boost the ESDm sector. In this regard, what are your expectations from the Union Budget 2023-24? What are your recommendations to the government?
I would say such a huge investment was majorly done with the focus on making India a global hub of electronic system design and manufacturing. Considering this the budget may have focused at driving the long-term strategies for developing a sustainable semiconductors and display ecosystem, setting up a specialized and independent ‘India Semiconductor Mission’. This initiative should propel innovation and build domestic capacities to ensure the digital sovereignty of India. I would say in the coming times the government may facilitate support from capital and technological partnerships at an accelerated level.
Q. You are undertaking a lot of key initiatives in the semiconductor ecosystem. Would you like to highlight any recent case studies and also some of your upcoming initiatives?
Rethinking strategies in six crucial areas—technological leadership, long-term R&D, resiliency, talent, ecosystem skills, and increased capacity—could be advantageous for semiconductor businesses. A trend that could have significant market repercussions is that increasingly significant car OEMs and large technology businesses are moving chip design in-house as a result of the shortfall. Over the past 20 years, the industry has become more and more consolidated inside several of these value chain divisions, and a few leaders have arisen in each field.
There are many interdependencies along the value chain because no local market possesses all the capabilities needed for end-to-end semiconductor design and manufacturing. The convergence of expertise has certain benefits because it frequently enables businesses to share resources, such electricity supplies, even when they are competitors, which lowers prices. Many automotive OEMs and other businesses are focusing on "just in time" ordering. They have begun ordering more chips so they may increase their inventory and have plenty on hand. Several players increased their semiconductor stock levels to ensure supply in response to uncertain trade trends. In the long run, some businesses may think about asking for legally enforceable "take or pay" contracts where they can choose whether to accept a set amount of chips or pay a price if they choose not to.
Q. What are the latest technology innovations you are looking forward to in the semiconductor industry and what are the kinds of upcoming chips, which you think will be a game-changer?
Decreased time to market has emerged as one of the most important priorities in the semiconductor business, which is becoming more and more solution-centric.
Semiconductors, such as memory chips, are a central part and a crucial prerequisite for any proposed ventures in emerging technologies. The semiconductor industry has not shied away from anything, from the adoption of the Internet of Things (IoT) to smartphones that depend on artificial intelligence (AI), 5G, or the automotive industry.
Deep learning and artificial intelligence have uses in practically every industry. The advantages are multiplied for companies involved in the semiconductor industry. There is a need for increasing revenue and demand for the chips and components needed to run neural networks
Also lowering manufacturing costs by leveraging AI to improve the manufacturing process and automating the QA process. AI systems must quickly manage a lot of data. Although general-purpose chips now perform well enough to launch a new generation of AI technology, they are unable to keep up with the exponential growth in the amount of data that AI systems process. This led to the development of algorithmic-specific chips for hardware-based acceleration.
Q. What is the future of the semiconductor industry in India?
With improved memory pricing, progress is propelled by laptops, mobile phones, servers, smart homes, cars, wearable technology, gaming, and Wi-Fi access points. Additionally, as capacity increases, pick up speed in the upcoming years, IC shortages will lessen. I would say the semiconductor business has a promising future and is expected to develop significantly through 2023 and beyond. According to recent reports, the worldwide semiconductor sector remained resilient with revenue growth of above 7.5 % with the expectation to exceed the $480 billion mark in 2021, despite the economic crisis and the global pandemic. The semiconductor market was anticipated to expand by 16% in 2022 and reach excess volume by the end of 2023. In the meantime, the sector will witness the expansion of the memory chips market, which is expected to be amongst the accelerating semiconductor category.
