DONE BY

NIKHIL JAIN
------------200039
RAJA
SUKUMAR-------
200078
SHRESTH
NIGAM------
200088
SANCHIT
MIGLANI----

SEMICONDUCTOR CHIP 200072

SOURAV
SAHANI------
200083

SHORTAGE

FACULTY MENTOR – TUSHAR JARUHAR

 Introduction
Semiconductors, sometimes referred to as integrated circuits (ICs) or microchips, are made
from pure elements, typically silicon or germanium, or compounds such as gallium arsenide.
In a process called doping, small amounts of impurities are added to these pure elements,
causing large changes in the conductivity of the material. Due to their role in the fabrication
of electronic devices, semiconductors are an important part of our lives. Imagine life without
electronic devices. There would be no smartphones, radios, TVs, computers, video games, or
advanced medical diagnostic equipment. A single semiconductor chip has as many transistors
as all of the stones in the Great Pyramid in Giza, and today there are more than 100 billion
integrated circuits in daily use around the world—that’s equal to the number of stars in our
corner of the Milky Way galaxy. It is truly a modern marvel, a feat of human ingenuity and
engineering unmatched by any other industry. Semiconductor firms generally organize their
activities around the two main stages of semiconductor production: design and
manufacturing. Companies that focus only on design are referred to as “fabless” firms, while
companies that focus only on manufacturing are called “foundries.” Semiconductor firms that
do both are called Integrated Device Manufacturers, or IDMs.

Weak demand and COVID safety concerns forced the semiconductor industry to operate at a
much-reduced capacity, driving utilization rates to historic low levels. During the lockdowns
and the massive shift to work from home, many companies and consumers rushed to buy PCs
and tablets in numbers not seen for many years. Plus, with schools closed, the demand for the
already scarce gaming platforms increased.
 Problem Statement
Exxon automation Pvt limited is the leading manufacture of electric vehicles, scooters, and
bikes in India. Before pandemic they had record breaking sales in their EV cars segment.
They were planning to diversify their market segment into EV autos and EV buses, but due to
the global shortage in the semiconductor chips all around the world. It has become very
difficult from their part to meet the demand due to shortage of these chips. It is a nightmare
for Exxon as their USP is to sell these EV vehicles at an affordable cost. This means they
have to increase their cost to remain relevant in the market. This will be led to loss of market
share in the Indian market.

BUSINESS IMPLICATIONS
AUTOMOTIVE

Some domestic and global automobile manufacturers have had to cut output and/or
temporarily halt production due to the semiconductor shortage. Sales of semiconductors for
automotive applications primarily depend on car sales volume and the level of vehicle
digitization and electrification. In terms of semiconductor demand, hybrid electric vehicles
(HEV) and electric vehicles (EV) are particularly important since they contain more
semiconductors than combustion-engine vehicles.

Mahindra and Mahindra M&M said it would cut output by 20-25 percent due to the
semiconductor shortage. Maruti Suzuki, India's largest carmaker, will see a 60 percent cut in
production due to shortage in supply of semiconductors.

Type of Automotive Examples Use- cases

Chips
Analog A/D converters, D/A Engine temperature monitor
converters, amplifiers
Optoelectronics Sensors, actuators, image Dashboard lighting
sensors, LEDs
Discretes Power transistors, rectifiers Airbags
and diodes, RF Chips
Logic Microcontrollers, Anti-lock brakes
microprocessors, digital
signal processors, FPGAs
Memory DRAM, SRAM, NAND GPS navigation
flash, NOR flash

IMPACT ON PRODUCTION OF ELECTRONICS

Semiconductor companies provide components for many consumer-electronics products,

including video games, televisions, and watches. Consumers use discretionary funds to
purchase most products in this category, so demand is highly correlated with local GDP.
Consumer electronics are faring better than wireless communication because of a recent rise
in demand for gaming devices, audio equipment, and some kitchen appliances—a trend likely
occurring because people are spending more time at home. Although this increase has partly
offset the significant declines reported for other consumer-electronics products, it likely
stems from one-off purchases and thus will not persist over time. In consequence, the
decreased demand for consumer-electronic semiconductors will extend in coming years.

Many tech companies have begun developing their own chips, a move that will not only
alleviate the current supply concerns but will likely help the industry in the long run.
Apple is using its own M1 chip in its new iPads and Macs. A report by Nikkei Asia suggests
that Google is  developing its own central processors that will be used in CPUs of its
Chromebook laptop from 2023.

WIRED COMMUNICATION

Demand for semiconductors used in wired communication applications increased by 8 to 11

percent in 2021 because of several pandemic-related factors, which includes –

 more security upgrades for existing enterprise infrastructures as more employees work
from home

 a more than 50 percent increase in fixed broadband usage in some countries, leading
to more purchases of cable/DSL and wireless routers as workers upgrade internet
connections in private home offices

 higher internet traffic, which will spur demand for switches and routers

 greater demand for cloud services and associated computing nodes, which will
increase the need for optoelectronics in data centre fibre connections.

 a more than 40 percent increase in video streaming across many networks.

PROPOSED SOLUTION

Governments come to the rescue

The chip shortage has now become a talking point not just between companies and
governments, but also between leaders of countries. Western countries have expressed a need
to shift manufacturing within their countries and become self-reliant.

Prime Minister Narendra Modi met Qualcomm CEO Cristiano Amon on September 23,
during the former’s ongoing visit to the US. Amon tweeted that they discussed 5G, vRAN,
digital transformation, and the importance of semiconductors and a reliable geo-diversified
supply chain.

A statement from the Prime Minister’s Office said they discussed investment opportunities in
India’s telecommunications and electronics sector, including the production-linked incentive
scheme (PLI) scheme. PM Modi and Amon also spoke about developments in the
semiconductor supply chain in India.

The Ministry of Electronics and Information Technology (MeITy) has already drawn up the
Scheme for Promotion of manufacturing of Electronic Components and Semiconductors
(SPECS).

In the US, the Biden administration’s $2 trillion infrastructure investment package includes
$50 billion for the semiconductor industry.

US President Joe Biden had in April met the CEOs of AT&T, Dell, Ford, General Motors,
Fiat Chrysler, Intel, Northrop Grumman, and others. He stressed the need for the US
Government to push investment in the industry to stay ahead of competition.

The South Korean government has announced a massive $451 billion investment to help
companies boost production of semiconductors.

How can this problem be managed:

A delicate balance

Changes in semiconductor policy, however, must be entered into gingerly. The half-trillion-
dollar semiconductor supply chain is one of the world’s most complex. The production of a
single chip often requires more than 1,000 steps and passing through international borders 70
or more times before reaching an end customer. Policies that affect even a single firm or
process can have massive global ripple effects.

Globally, the US still dominates microprocessor research and development but it lacks firms
in certain key subsectors, especially photolithography tools (the most expensive and complex
form of semiconductor manufacturing equipment) and the most advanced chip factories
(especially foundries, which manufacture chips for third parties). Taiwan is dominant in the
most advanced manufacturing while South Korea also produces significant amounts of
materials and some manufacturing equipment.

China is progressing in both semiconductor design and manufacturing, with the help of state
support. In addition to investing heavily in manufacturing and production capabilities,
America must accelerate investment in advanced semiconductor R&D to drive the next
generation of innovation and sustain US leadership in this critical technology.

Rethinking supply chains

Semiconductors are the backbone of the digital economy with most electronic devices often
using many chips—not just the central processor, but less expensive ones for controlling the
display, managing power or operating a 5G modem, for example.

Semiconductors enable “smarter and safer transportation, greater broadband access, cleaner
energy, and a more efficient energy grid, while also providing high-paying jobs for
Americans and strengthening our advanced manufacturing base,” the Semiconductor Industry
Association noted in its letter to President Biden.

While chip shortages are likely to remain in the coming months, plans for supply resiliency
must be crafted, from research and development through to manufacturing. IBM has helped
strengthen the US microelectronics supply chain for years, and the current challenges are no
exception. IBM has recently begun laying the foundation of an ecosystem to help secure and
advance the US microelectronics supply chain while also leading the charge on domestic
next-generation AI chips and systems innovation that will help address future needs.

“Ultimately, securing the microelectronics supply chain of the US and our allies is a
challenge we all need to face now,” Halvorsen noted. “It’s the only way we can ensure
sustainable long-term capability in this critically important area.”
Leading to the Shortage

The semiconductor chip industry is quite cyclical, and the increase in demand is not a new
phenomenon. The chip industry has faced the long-term challenge of having a tightly
balanced supply-demand ratio given the dynamic changes in demand. In comparison,
building a semiconductor chip factory takes a couple of years, making it harder to meet the
demands. But, this challenge just got exacerbated due to a combination of reasons. The
waiting time for chip delivery gap has astronomically increased for Auto OEMs. This, to the
extent that fresh capacity commissioning and allocation is still about a year away.

During the pandemic, there was a huge increase in demand for electronic devices that the
industry couldn’t meet. Automotive manufacturers did not consider the few months it takes to
reinstate orders that had been cancelled during the pandemic, leading to a larger delay in
orders.

Geopolitical factors have also played a huge role, specifically the trade war between the US
and China. The US and China are the largest semiconductor markets, each accounting for
25% of global consumption. The Trump administration’s tight regulation of semiconductor
sales to Chinese firms led to stockpiling chips essential to 5G smartphones and other
products. In return, the American firms were being cut off from China’s Semiconductor
Manufacturing International Corporation chips. While Biden views the semiconductor
shortage as a “top and immediate priority” in the US, India doesn’t have any operational
wafer fabrication plants and depends heavily on semiconductor imports.

This was only accompanied by local disruptions to the supply chain, such as the high
rejection rates in Italy, winter storms in Texas, fire at the semiconductor plants in Japan,
draught in Vietnam and the Covid Delta Variant in the Indonesia STM plant.

Recovery Plan
This semiconductor shortage isn’t likely to resolve in the short term, given that chip capacity
can’t catch up with demand immediately. But practices such as capacity allocation and
management can help manufacturers meet the short product life cycles and customer
demands in the shorter run. Automakers and tier-one suppliers have also begun to collect
sophisticated intelligence on the chip value chain and manufacturing locations to make more
informed decisions regarding factors such as contract terms and reassess the landscape.
Additionally, manufacturers can leverage technology and analytics to match supply with
demand, manage variants and prevent manual errors.

In the longer term, manufacturers will need to rethink how they structure the industry’s plans.
This includes capacity addition in the industry and creating a strategic road map that makes
AI the top priority and emphasises the company’s total value. Additionally, mapping the
semiconductor value chain that focuses on every part of the supply chain process helps ensure
that all the steps are flexibly running to meet the demands.

Leveraging AI

There is a need for collation at a global level to map the entire supply value chain efficiently.
This entails collaboration between countries on new areas of electromobility, autonomous
and connected vehicles.

The supply-demand imbalance is going to continue in the foreseeable future. This means that
the production of any new fabrication unit for the semiconductor plant will cost around
fifteen to twenty billion dollars, not to mention the time to set up a plant, which can extend
from three to five years. AI can step in here and help parts of the semiconductor value chain
to quicken the pace.
The application of AI/ML can dramatically accelerate the semiconductor industry over the
next few years. AI can increase the speed involved in R&D by eliminating defects, incorrect
processes, accelerating yield ramp up and suggesting ways to avoid time-consuming
iterations. Additionally, they also automate physical layout designing and the verification
process. This allows for quick stimulation of the chip technology optimisation for fully
capable auto-grade chips with higher manometer wafers.

AI also plays a huge role in risk assessment by allowing manufacturers to spot upcoming
trends in the market and make the most of the current opportunities. This reduces the risk
posed by market shifts and logistics.

While it takes humans around six months or so to build one processor, AI can develop faster
and more efficient processors through algorithms, with lesser time and a better combination
of power & performance, as proved by Google.

The utilisation of AI and predictive systems add the last layer to a perfect semiconductor
supply chain process – continuously scanning for defects in real-time. This allows
manufacturers to significantly improve the quality of their products, increase yield to meet
the demands and prevent wastage of material and money by identifying the defective
materials.

An AI computer vision-enabled perfect manufacturing process flow leads to better production

yields, i.e., 100 per cent accurate parts, given its process inspection and quality control. This
acts as a game-changer for chip manufacturers to improve their production yield, reduce
wastage and optimise the design. It does so by streamlining the supply chain disruption by
mapping the value chain, predicting risks arising out of potential disruptions, and offering
data analytics for quick decision-making. In the situation of the present shortage, this will
also help conserve the limited resources and costs.
The Three Dimensions of Policy Making

The semiconductor value chain is interdependent and interwoven with several industries,
making it critical for governments to create policies that address the three important
dimensions in the longer run.

To ensure the global level of collaboration, government policies should focus on ensuring &
securing access to foreign technology providers through the means of trade and foreign
policy. Meanwhile, strategic industrial policies should be put in place to assist domestic
companies in building leverage and strengthening themselves. Lastly, it is most important to
have policies that foster and support a more resilient supply chain that can meet the demands!

This article is written by a member of the AIM Leaders Council. AIM Leaders Council is an
invitation-only forum of senior executives in the Data Science and Analytics industry. To
check if you are eligible for a membership, please fill the form here.

How to Prevent the Next Semiconductor Shortage

Identifying Long Lead Times to Drive Accurate Forecasts

OEM planning horizons typically range from 26 to 52 weeks of forecast information

provided to Tier 1 suppliers from their automotive OEM customers. Unfortunately, the full
horizon of planning information rarely gets communicated to the lowest tiers of the supply
chain. Tier 1 and 2 suppliers typically pass on only a portion of the full OEM horizon which
can be as little as 8 weeks. Why? We have found that these organizations don’t trust their
planning data for several reasons:

Manual processes are often used to analyze changes in customer-provided forecast data

Poor inventory management and lack of full inventory visibility, including inventory held by
next tier suppliers

Concern of having enough parts on-hand to avoid production disruptions (no one wants to be
the function that shuts down production!)
Slow, manual communication of demand requirements to suppliers

In short, organizations are not leveraging ERP or using electronic communications with their
suppliers down the chain. Long-term planning information is critical for the lower tier
suppliers to plan and purchase their materials wisely. Without the full planning horizon,
suppliers are left guessing what to order and how to best allocate their production resources.
When the supply chain guesses incorrectly at any level, parts shortages will inevitably lead to
costly premium freight and potential production disruptions up the supply chain.

Why does it take so long for information to move down the supply chain today?

First, the longest lead time in the supply chain needs to be determined. Overall supply chain
lead time is the aggregate of lead times at each tier. In the case of semiconductors, lead time
was reported anywhere from 22 to 26 weeks. Determining these lead times is an essential
supply chain process requiring review and updates regularly to adjust lead time information
based on current market conditions. We find that most organizations don’t have a clearly
defined process within their management systems for lead time determination. In addition,
risk-triggered review of lead times is often not performed systematically.

Next, if EDI is in place at each tier of the supply chain, it can take one day per supply tier to
communicate demand requirements. This was proven many years ago in an AIAG report
entitled the Manufacturing and Assembly Pilot Project. As an example, in the case of a four-
tier supply chain, it can take four days in the best case to communicate requirements if EDI is
in place at each tier. However, if EDI is not in place and forecast information is sent
manually, it typically requires at least one week per tier to communicate requirements down
the supply chain. In the case of the semiconductor shortage, if EDI was only in place between
the OEM and Tier 1, in this six-tier supply chain, it could take 4½ weeks to communicate
demand down to the semiconductor manufacturer. When demand information is not
communicated quickly, it will be out-of-date by the time it arrives at the lower supply tiers.
Some suppliers may carry excess inventory in anticipation of unknown demand, while others
will allocate their limited production capacity to other customers or markets, as is the case in
the semiconductor shortage.
How can we use lead time as an essential supply chain process to prevent the next
disruption?

Let’s explore in more detail the type of review your organization should perform not only on
your processes, but also within your supply chain for critical or long lead time parts. Here are
key questions, derived from MMOG/LE, you should be asking your organization related to
long lead time and critical parts. More importantly, ensure your answers are documented in
management system processes and that employees are trained on these topics to prevent
production disruptions due to long lead time and critical parts.

Evaluation of choices:

Evaluation of 5 being very easy 1

choices Metrics not so easy    
         
resources average
  Time bound availability cost score
4.33333
A delicate balance
4 4 5 3
         
Leveraging AI 3 2 1 2
         
The Three
Dimensions of 3.33333
Policy Making 3 4 3 3