Efforts to Diversify Semiconductor Supply Chain Gather Pace

The past two years have brought out the importance of semiconductors in driving economies like never before. Whether it is the demand shock created by COVID-19 or the US-China tech war, the need to diversify the semiconductor supply chain has dawned on governments the world over. The issue is also being eagerly discussed at global forums, the recent meeting of the Quadrilateral Security Dialogue (or Quad) being the latest example. Quad members US, India, Japan and Australia have decided to work together to secure the semiconductor supply chain.

Another factor pushing such efforts is China’s attempts to set global standards for emerging technologies like 5G internet, IoT and AI through its “China Standards 2035” plan, which seeks to build on the “Made in China 2025” plan. Clearly, the ongoing global chips shortage has only accentuated the concerns about over-dependence on a few markets for critical technologies.

Many economies are currently at work to achieve self-dependence in meeting their chip requirements. But it takes years to build semiconductor fabrication facilities and much expenditure to maintain and upgrade them. Therefore, the idea of becoming “self-sufficient” or “independent” is not a viable option. Still, many economies like the US, EU and East Asian countries are calibrating their measures to indigenize as well as diversify the semiconductor supply chain to have a more resilient supply network. We list below a few such efforts:


As the world’s largest contract chip manufacturer, TSMC has hugely benefited from the global chip shortage. To maintain this leadership and diversify its production locations, it plans $45 billion worth of capital investment in Taiwan and beyond.


A $52-billion plan includes incentivizing the production of “mature node” semiconductors used by the automobile, medical device, agricultural machinery and defense equipment industries. The legislation to this effect, which is broadly supported by the chip industry, would also facilitate funding for new chip fab units. This would help the companies that build them and fabless companies such as AMD, Nvidia and Qualcomm, which rely on contractors to manufacture their products. US’ share in chip manufacturing has dropped to around 11% from almost 40% in the last 30 years. With this move, the US can potentially restore its position in the global supply chain.


With the onset of the European CHIPS Act, Europe aims to double its current market share of semiconductor production to 20% by 2030 with an allocation of $49 billion. The plan includes building a new framework to ensure the security of supply along with a dedicated ‘Chips Fund’ to focus on exports. The said plan will also have a provision to ‘halt exports’ as a last resort in case of emergencies and crises. The EU is also mobilizing more than €43 billion in public and private funding to support broader policy goals around digitalization, green transition and R&D.


Under the “Made in China 2025” plan, China aims to produce 70% of the semiconductors it uses by 2025. The government has also signed massive deals with SMIC in this regard. The said project will also have a minority holding of the government along with funding support from the respective local government. Most recently, the country also introduced many industrial policy measures to help boost its domestic semiconductor industry through tax relief to chip manufacturers. For example, a manufacturer that has been in operation for more than 15 years and makes 28 nm or more advanced chips will be exempted from corporate income tax for up to 10 years.


The most recent participant in the chip world, India has established its presence by introducing a semiconductor policy under the Production Linked Incentive scheme. With an outlay of almost $10 billion for six years, the scheme aims to incentivize all major stages of semiconductor production – Semi/Display Fabs, Semi ATMP units and Designing. This scheme is by far the most comprehensive package designed for the sector by the government. With a special provision on designing, the Indian government has worked well to leverage this advantage of the country compared to the rest of the world. One of the best parts has been the promise of nurturing (under DLI) some 100 domestic semiconductor design companies, offering hope to the many design-linked concerns of the ecosystem.

Semiconductor Policy Plan For Different Regions
Semiconductor Policy Plan For Different Regions


The geopolitical dynamics will also shape the future of the semiconductor market, an angle that has come under much scrutiny during the last couple of years. Various ‘alliances’ and ‘councils’ are already at work preparing plans to diversify the supply chain and gain “self-sufficiency”. On the one hand, we have the Quad alliance taking shape in the Indo-Pacific region, while on the other hand, we have the newly formed EU-US tech alliance called the Trade and Technology Council, where France is expected to pivot the semiconductor negotiations. Moreover, the European Alliance for Processors and Semiconductors is bringing many EU member states together for business, research and technology under the semiconductor ambit.

A key differentiator among all these efforts would be how well each economy utilizes the combination of money, time, innovation and know-how, using both international and homegrown talent. Besides, they will have to position themselves in a way that minimizes risks and reshoring impact when it comes to trade inflows and outflows. This is especially true with respect to the US, EU and Southeast Asia considering other changing factors like labor cost, economic tensions (Ukraine-Russia war) and even the not-so-gone COVID-19, which have the ability to impact the demand-supply harmony of this ecosystem.

*Source for the table: Government documents and notifications

Indonesia Smartphone Shipments Drop 6% YoY in Q3 2021 on COVID-19, Supply Challenges

Boston, Toronto, London, New Delhi, Beijing, Taipei, Seoul – November 18, 2021

Indonesia’s smartphone shipments declined 6% YoY in Q3 2021 mainly due to increased COVID-19 infections, according to Counterpoint Research’s Monthly Indonesia Channel Share Tracker. The ongoing global component shortages also played a role. Despite these challenges, the market managed to sustain volumes QoQ.

As components dictate the smartphone industry dynamics, nearly all of the Top 5 smartphone brands faced varying degrees of shipment challenges. OPPO emerged as the leader with a 22% share. It was least affected by the component shortage during the quarter. This is partly due to the limited impact from COVID-19 resurgence and social restrictions on OPPO’s manufacturing facility in Indonesia. Samsung came in second as its performance improved driven by new launches. Gradual recovery from production issues related to the COVID-19 lockdowns in Vietnam played a part as well. vivo, Xiaomi and realme followed Samsung in the Top 5.

Xiaomi’s rank dropped in Q3 2021 compared to Q2 2021 due to component shortages. The rising cost of components forced the brand to increase prices on four models – Redmi 9A, Redmi 9C, POCO M3 Pro 5G and Redmi Note 10 5G – around mid-October.

Counterpoint Research Smartphone Share by Brand in Indonesia Q3 2021
Source: Counterpoint Research Monthly Indonesia Channel Share Tracker, September 2021

Consumer demand showed signs of recovery in Indonesia towards the end of Q3 2021, thanks to the continued flattening of COVID-19 daily infections and economic activities returning to normal. However, Indonesia’s smartphone industry growth outlook in the near future will be affected by supply uncertainties.


Research Analyst Paula Ruth said, “5G smartphone contribution to total smartphone shipments jumped from 7% in Q2 2021 to 14% in Q3 2021. We see this proportion increasing towards the end of Q4 2021 and beyond. In Q3, XL Axiata passed the operational suitability trial required by the government to launch 5G in the country. The operator then started preparations for 5G commercialization by conducting 5G showcases in various big cities in Indonesia. Earlier, Telkomsel and Indosat had launched commercial 5G in Q2 2021. With operators’ efforts to expand 5G coverage in the country, there is a growing consumer preference for 5G smartphones.”

Online channels

While the online proportion of total shipments did not change much during the first two months of Q3, the online shopping festivals in September, like 9.9, gave a much-needed push to the channel. Online shipments accounted for 16% of total shipments in Q3 2021. This proportion is likely to increase to around 20% by the end of this year.

Feel free to contact us at press(at) for questions regarding our latest research and insights, or for press enquiries.


Counterpoint Technology Market Research is a global research firm specializing in products in the TMT (technology, media, and telecom) industry. It services major technology and financial firms with a mix of monthly reports, customized projects and detailed analyses of the mobile and technology markets. Its key analysts are seasoned experts in the high-tech industry.

Paula Ruth

Counterpoint Research


When the Chips are Down: Governments Move to Address Shortage

If there is one thing that COVID-19 continues to teach us is to not underscore the early signs of any crisis. This holds particularly true for the ongoing chip shortage. The severity of the shortage is nothing less than a famine for the industries affected by it, with recovery nowhere near in sight. The crisis now lurks under almost every electronic product that is part of our lives. The demand-supply gap has exacerbated the already existing supply chain bottlenecks.

Policy Measures To Address Chip Shortage
Policy Measures To Address Chip Shortage

Reaction to tech famine

We all know how this semiconductor crisis started after COVID-19 triggered a mega-surge in electronic equipment demand. The crucial question is what can be done and how soon it must be done. For any economy, the ability to bounce back from a shock or crisis is a sign of it being a resilient economy. However, the ongoing crisis is yet to make even a single economy stand this test. This clearly shows the dangers of taking a monopolistic route to the supply of critical components. Governments across the world are now ramping up solutions by investing in indigenous semiconductor manufacturing and funding research incentives.

Supply chain relook and changing policy interventions

The shortage has not only affected the smartphone and allied space but also industries like automobiles. All this has brought under focus the concentration of global chip manufacturing in a few East Asian countries. Taiwan’s TSMC and South Korea’s Samsung, along with manufacturers in Japan and China, dominate this space globally. This has translated into a relook at the supply chain structure and a renewed focus on ‘self-sufficiency’ in regions like the EU and US, which are now keen to boost their domestic production capacity.

Policy intervention by US

The Biden administration has brought in the Innovation and Competition Act and intends to spend $52 billion for the semiconductors sector. Further, a 100-day review of the supply chain crunch has been conducted. It covered key semiconductor product lines, advanced batteries used in EVs and regulatory changes as well. Biden has unveiled an infrastructure plan worth $50 billion for the American semiconductor industry as a measure to subsidize domestic manufacturing and chip research. The $50 billion amount is expected to go towards production incentives and research and design, including the creation of a National Semiconductor Technology Center.

Policy intervention by EU

One of the most recent and comprehensive measures undertaken to address the chip shortage has been by the European Commission. It recently announced a new plan for a chipmaking ‘ecosystem’ to keep itself competitive and self-sufficient. The commission is planning for a ‘European Chips Act’ that would accelerate the development of advanced semiconductors across the EU region. The Act also proposes to have a semiconductor research strategy and bring together European chip production efforts, along with a framework for international cooperation and partnership. Significantly, as part of the plan, the EU will aim to produce at least 20% of the world’s semiconductors (by value) by 2030, up from 10 % last year.

Policy intervention by South Korea

The next big move is from South Korea, which is currently the second-largest producer of computer chips after Taiwan. In May this year, South Korea announced to spend $451 billion on domestic semiconductor production over the next decade. The said investment will be led by Samsung Electronics and SK Hynix under a national blueprint finalized by the government, along with 151 other companies. The investments will be focused on the “K-semiconductor belt”, a newly named region south of Seoul that hopes to be the epicenter of South Korea’s semiconductor push.

Policy intervention by Taiwan

Taiwan, which has some of the biggest and advanced semiconductor foundries in the world, is also actively working with stakeholders to solve the semiconductor crisis. Taiwan Semiconductor Manufacturing Company (TSMC), which is the world’s largest contract microchip maker, too is likely to invest around $100 billion over the next three years to meet the rising demand for semiconductors. Moving beyond borders, TSMC plans to expand its state-of-the-art semiconductor foundry in Arizona, US, which is also one of its integrated manufacturing units outside Taiwan.

Policy intervention by Japan

Japan too is exploring every opportunity to stay in the race. Its recent release of the Semiconductors and Digital Industry Policy is one such move. From contributing 50% (in the 1980s) to the global semiconductor production to its present share of around 10%, Japan has fallen behind significantly. The government, realizing the strength of its decade-old semiconductor industry, is now keen to do something not only to regain manufacturers’ faith but also to retain the existing ones. The government has also joined forces with TSMC and some 20 Japanese chip-making companies to set up a fab factory by 2023.

Policy intervention by India

India too is readying policy infrastructure to chase its dream of becoming an innovation-driven global manufacturing hub for mobile phones, IT hardware, automotive, industrial and medical electronics, IoT and other devices. After circulating an expression of interest (EoI), the government has now circulated request for proposal (RoP) documents to seek formal applications from companies to set up semiconductor plants in the country. The government had even unveiled a Scheme for Promotion of Manufacturing Ecosystem (SPEC) to offset the disabilities of India’s manufacturing and semiconductor ecosystem and strengthen its stand on ‘Make in India’ and ‘Digital India’ programs. Most recently, NXP India has collaborated with the Ministry of Electronics and Information Technology (MeitY) and Fabless Chip Design Incubator, IIT-Hyderabad, to start a ‘Semiconductor Startup Incubation and Acceleration Programme’ to facilitate semiconductor and IP design start-ups across India.

Situation now

Current production and demand trends suggest that the shortage is expected to continue until the first half of 2022. Foundries are already increasing wafer prices and, in turn, chip companies are increasing prices. One such example is the recent announcement by TSMC, one of Apple’s leading SoC suppliers, to increase chip prices by up to 20%. The crisis is all real and has become one of the key talking points among different governments and business leaders. India Prime Minister Narendra Modi met Qualcomm CEO Cristiano Amon this month during his visit to the US and discussed the need for a diversified semiconductor supply chain, along with other topics including 5G, vRAN and digital transformation.

Twitter - Qualcomm & India Discussions
Qualcomm & India Discussions on Chip Shortage Issues

Risks and anticipations

Although most cutting-edge semiconductor technology comes from the US, the lion’s share of manufacturing goes to East Asia, particularly Taiwan and South Korea. Over 83% of the global foundry revenue is generated by companies headquartered in Taiwan and South Korea. Consequently, the manufacturing facilities, equipment and materials are concentrated in a handful of countries. This makes the economics of semiconductor manufacturing an important geopolitical tool.

Efforts to rejig supply chains by abandoning one market may end up dragging the industry into a new cold war. Even as governments the world over race to deal with this crisis while keeping the geopolitics involved in mind, the winners as we see would be the ones who pursue innovation.


Global PC Shipments up 45% YoY in Q1 2021; Chip Shortage Impact to Continue in H2 2021

  • Global PC shipments grew 45% YoY in Q1 2021 on solid demand and a low base in the same period in 2020 due to COVID-19.
  • Shortages of key IC components will continue to affect the shipment schedules of PC brands and ODMs.

The recovery reported by the PC market in H2 2020 gained momentum in H1 2021. Global PC shipments grew 45% YoY to 75.6 million in Q1 2021 thanks to robust demand across different categories and a low base in the same period last year due to the COVID-19 outbreak. However, PC shipment volumes were down 14% sequentially from Q4 2020 due to seasonality.

With a 24% market share, Lenovo took the first place again in Q1 2021, followed by HP at 23% and Dell at 17%. The overall momentum of the PC market was mainly driven by the growth in gaming notebooks and surging demand from the work-from-home and study-from-home segments, which stimulated Chromebook sales.

Global PC Shipments by Vendor, Q1 2021 (units in million)

Counterpoint Research - Q1 2021 Global PC shipments of top brands

Counterpoint Research - Q1 2021 global PC shipments market share


In Q2 2021, PC shipments will remain resilient with the pent-up demand from Q1 2021 extending to this quarter. We believe the top six vendors will continue to dominate the market with over 85% share.

Stepping into H2 2021, the momentum from the previous half will continue and reach a peak with back-to-school (some will be virtual classes) demand as well as the pent-up demand from H1 2021. Premium models with higher ASPs could take the lead via big promotions, which may squeeze out Chromebook’s market share in H2 to some extent. In all, we predict a 16.3% YoY growth in 2021, with global shipments reaching 333 million.

Lead time will ease only in late H1 2022

On the other hand, our checks suggest ODMs’ component inventory levels are relatively higher. But they are still facing shortages of key components like power management IC, display driver IC (with display panel) and CPUs. We have found a 20%-30% gap between orders (end-demand) and actual shipments (supply), largely owing to the component shortage beginning H2 2020.

Lead Time (weeks) for Key Components in PC/Notebook Segments

Counterpoint Research - Lead time of key PC components

PMIC and DDIC have faced the biggest gaps in the PC segment, with the lead time almost two times more than the normal before the COVID-19 outbreak. For PC CPUs, it was gently improving in late H1 in several sub-segment products. Some vendors also said the demand for audio codec IC and LAN chip remained unsatisfied and would continue to remain so in the second half of this year. WiFi SoC has also faced relatively low inventory levels, which will prove to be a drag on 2021 global PC shipments.

Since we do not see any meaningful foundry capacity expansion in H2 2021, it is unlikely that the lead time for key IC components would recover from the current status. Therefore, PC brands and ODMs cannot fully solve the shortage issue and clear the orders backlog. We expect the demand-supply gap to gradually normalize in late H1 2022.

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Podcast: COVID-19 Second Wave to Test Resilience of India's Growing Smartphone Market

As India battles a more virulent second wave of COVID-19, lockdown-like restrictions have been imposed across several states. This has impacted several businesses and industries, including the country’s smartphone market, which had registered record growth in Q1 2021 due to pent-up demand. With the restrictions on, the smartphone growth story has not continued in Q2 2021 as smartphones are not considered an essential category.

The number of COVID-19 cases has come down from its peak in the last two weeks of May, bringing some respite. But how much of an impact has the second wave created on India’s smartphone sales and manufacturing? There is also a looming uncertainty around a possible third wave in the next few months that could lead to another demand and supply disruption.

In the latest episode of ‘The Counterpoint Podcast’, host Peter Richardson is joined by Research Director Tarun Pathak and Senior Analyst Prachir Singh. They discuss the current scenario in the Indian smartphone market, the global chip shortage, and how manufacturing capacity and inventory have been affected. The imbalance also raises questions about the forecast and outlook for 2021, where Prachir and Tarun have covered different scenarios and use cases that could guide the market this year.

Hit the play button to listen to the podcast

You can read the podcast transcript here.

Podcast Chapter Markers

  • 2:23 – How India’s smartphone market performed in 2020, and how it progressed into 2021?
  • 6:19 – How are the COVID-19 second wave and lockdown-like restrictions impacting smartphone sales in India?
  • 8:22 – What impact does the second wave have on India’s smartphone production capacity?
  • 10:55 – What is happening on the inventory side with a demand reduction?
  • 12:16 – There is a looming possibility of a third wave in the coming months, so what kind of impact could that have?
  • 14:53 – Is the reduced smartphone demand helping ease pressure on smartphone chipmakers and component players?
  • 18:13 – Is COVID-19 impact further lengthening the smartphone replacement cycle?
  • 24:47 – Where does our forecast for the Indian smartphone market stand currently?

Also available for listening/download on:


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