Shortage of semiconductor chip in global market to impact on Indian medical technology sector

New Delhi, December 13, 2021:

The shortage of semiconductor chip in the global market may have a significant impact on the Indian medical technology sector and the length and severity of the situation may depend on how well the crisis is managed and how the country focuses on essential products for the supply of chips, says Pavan Choudary, chairman and director general, Medical Technology Association of India (MTaI).

The shortage of semiconductor chips started during the lockdown period towards the end of 2020 as the productions were halted and chip demand for both devices and data centres spiked in 2020 and in 2021, as many people started working from home.

Besides, the lead time in manufacturing of chips has jumped from the earlier four-to-eight weeks to 30-40 weeks now and, in certain components, even 100 weeks.

Currently, the demand is being met by importing the chips from China, Japan, Taiwan and the US. However, according to reports, due to an increase in production time there is already a huge shortage of devices like ECGs, patient monitors and defibrillators and ECGs that use touchscreens. The chips are sourced from domestic vendors who import these from China, Japan, Taiwan and the US.

“Medtech players said that by the end of the year stocks could be significantly impacted and prices could go up by as much as 20%. This will more likely impact the cost to the consumers as well, as we are already experiencing it in the automobile sector,” he said.

India's semiconductor demand stands at around $24 billion (Rs. 1.8 lakh crore) and is expected to reach $100 billion (Rs. 7.5 lakh crore) by 2025. Almost any medical device which runs on electricity or batteries depends on semiconductors to operate. Semiconductors shortage has also impacted critical care as they are used in portable ultrasound devices, ventilators, MRI, pacemakers, BP monitors, bedside patient monitors etc. They are also critical for telemedicine and wearables and hence impact rural access to healthcare and elder care.

While the exact figures are not available, India imports 100% of its semiconductors which means that the impact is significant. It has already hit the sectors like consumer electronics and automotive industry severely.

Experts believe that the shortage is here to stay for more time as currently the dependence on semiconductors is concentrated to some countries, and setting up a manufacturing unit is a herculean task as it has on multiple bottlenecks like requirement of huge investments, high operating costs, uninterrupted electricity supply etc, observed Choudary.

“The semiconductor industry supply chain is a global process and hence it is very difficult for a country or region to become self-sufficient in this space. Hence, how well we manage this crisis and how we focus on essential products for the supply of chips will determine the length and severity of this situation,” he added.

India has recently joined hands with Taiwan and is working towards signing a preferential trade agreement of $7.5 billion. Also as per reports, the Indian government is working on a multi-billion-dollar package to promote semiconductor manufacturing in India through the PLI scheme. With sufficient import and promoting in-house manufacturing India can aim to be a chip centre as well in future, he averred.

Deloitte Consulting LLP, in a Blog post in October, said that the hyper growth in semiconductor chip demand, along with the pandemic and weather-related supply chain disruptions caused critical chip shortages in various industries. The global market is projected to nearly double from $452.2 billion in 2021 to $803.1 billion in 2028, it said. 

 Pharmabiz