Howzzat! A $1 billion cash reward for making semiconductor chips in India⁠ is under consideration

• The COVID-19 pandemic triggered a massive demand for servers, internet connectivity and cloud usage.
• The supply chain that more often than not started in China, which is a world leader in making semiconductor chips, broke as the world went into a lockdown.
• Computers, smartphones, cars and microwave ovens are only some of the products that heavily rely on semiconductor chips.
• Check out the latest news and updates on Business Insider.

Semiconductors are typically silicon chips that perform control and memory functions in a wide range of products⁠ — from computers and smartphones to cars and microwave ovens, to name a few. And there are very few of them, compared to the demand, since the pandemic.

So much so that car makers like Ford, Nissan, Volkswagen, Fiat Chrysler and Toyota recently cut back production citing a shortage in semiconductors. And to fill that void that is stalling the manufacturing of electronic products, India may soon start offering a cash incentive, worth a whopping billion dollars, to companies that make semiconductor chips in India.

“The government will give cash incentives of more than $1 billion to each company which will set up chip fabrication units,” an unnamed government official told Reuters. Private companies will be ordered to buy ‘made in India’ chips so that these new fabrication units have assured buyers for their product.

As it stands today, demand is not a problem for chip makers anywhere in the world. There is a huge addressable market that is growing by the day with the proliferation of electric vehicles⁠ and fancy cars loaded features like Bluetooth connectivity and driver-assist, navigation and hybrid-electric systems.

Here’s how the global demand for semiconductor stacks up around industries

Category	Demand Share	Total Value
Communication	33%	$136 billion
Computer	28.50%	$117 billion
Consumer	13.30%	$54.7 billion
Automotive	12.20%	$50.2 billion
Industrial	11.90%	$48.9 billion
Government	1.30%	$5.2 billion

Source: Semiconductor Industry Association, 2020 cited by EY

The COVID-19 pandemic triggered a massive demand for servers, internet connectivity and cloud usage as more people started working from home and, therefore, were in need for online collaboration. The pandemic broke the supply chain that more often than not started in China, which is a world leader in making semiconductor chips.

The shortage of chips was worsened as soldiers from India and China locked horns in the Galwan valley in Ladakh. The arrival of imports from China were delayed due to the military and diplomatic standoff.

A big part of India’s Atmanirbhar (self-reliance) programme is weaning itself from relying on China for key inputs. And the Narendra Modi administration seems to be wanting to get it done sooner than later.

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