India’s efforts to establish domestic semiconductor manufacturing could face significant challenges in the coming years. A study by Moody’s risk management solutions suggests that the risk of flooding in the country could double in the next three decades due to climate change. The study also predicts a rise in the costs associated with flooding, water stress, sea level rise, and heat stress. These climate-related risks could have serious implications for India’s semiconductor industry, which is crucial for various sectors, including computers and cars.
The erratic weather patterns that India has experienced this year further highlight the potential impact of climate change. From record-breaking warm temperatures in February to unusually heavy rainfall in March and a severe lack of rainfall in August, the country has witnessed a range of extreme weather events. Such erratic weather patterns can disrupt supply chains and ultimately lead to production delays or stoppages in sectors reliant on semiconductors.
India has been positioning itself as a viable alternative for electronics manufacturing, especially as geopolitical tensions with China prompt the West to seek alternatives. Chip manufacturing has been identified as a key driver of India’s future economic growth, and the government has approved a $2.75 billion packaging plant by Micron Technology. However, Taiwan, which currently dominates advanced semiconductor manufacturing, is also vulnerable to climate risks. Moody’s warns that costs related to climate risks could significantly increase for chip plants in Taiwan over the next few decades.
The impact of climate change is not limited to the semiconductor industry. Various sectors of India Inc., including Hindustan Unilever, Hyundai, Emami, and Varun Beverages, have recognized climate change as a major risk to their businesses. Unseasonal showers, irregular weather patterns, and diverse rainfall patterns are all affecting their bottom line. The rural sector, in particular, is vulnerable, with a decrease in demand anticipated due to El Nino and the current monsoon deficit.
India’s automotive industry has already experienced negative impacts from erratic rainfall distribution. Maharashtra remains a leading market, while Kerala has seen a decline in sales due to floods, a decrease in rubber prices, and a slowdown in the Gulf region. Executives at Maruti Suzuki, India’s largest carmaker, note that floods are a key factor affecting consumption trends in the country.
In conclusion, as India strives for semiconductor self-sufficiency, it must confront the growing risks posed by climate change. The increased likelihood of flooding, water stress, and other climate-related challenges could hinder the country’s efforts to establish a robust semiconductor manufacturing ecosystem. Furthermore, various sectors of India Inc. are already experiencing the negative consequences of climate change, with disruptions to supply chains and reduced consumer demand. It is essential for policymakers and businesses to consider climate risks in their long-term strategies to ensure resilience and sustainability.