Semiconductor shortage: Global semiconductor shortage dampens party spirit for consumer electronics and automotive companies


The global semiconductor shortage is hitting India’s mobile, consumer electronics and automotive industries hard in the middle of the holiday season, when sales typically peak, as the auto industry has racked up around 5 lakh of pending orders. While customers usually get great bargains or festive discounts during this time, this time they are paying more for a slew of items ranging from mobile phones and televisions to cars due to the chip shortage. Freebies have disappeared from most auto showrooms as manufacturers struggle to keep up with demand.

“If you look at the parameters of the demand, which is reflected in the reservations or in the requests, they are very good. However, the supply this year is unfortunately a little reduced due to this semiconductor problem.

“This is the reason why the number of reservations has piled up but the supplies have not arrived,” Shashank Srivastava, Senior Executive Director (Marketing and Sales) of Maruti Suzuki India, told PTI.

The auto industry, he added, “according to current estimates, has 4.5 lakh to 5 lakh in pending bookings and Maruti Suzuki alone has pending bookings in the range of 2.15 lakh. at 2.2 lakh “.

The problem didn’t get worse until October but intensified from August to September, Srivastava said, adding that he expects “discounts and great deals to be very soft this time around. due to supply constraints “.

Unlike the usual build-up of inventory of around 40 days by businesses at the dealer level to meet the increased retail demand during the holiday season, particularly around Navratra and Diwali, this time around, it’s less than 15 days, he said.

The estimated stock inventory as of October 1 was around 1.75 lakh units compared to wholesale sales of around 3.35 lakh units in the same month last year. It was around 2.25 lakh on September 1 of this year.

According to Rajesh Menon, CEO of the Society of Indian Automobile Manufacturers (SIAM), due to the severe semiconductor shortages faced by Tier I and Tier II component suppliers, automakers face supply constraints. in parts such as electronic engine control units, keyless entry, ABS systems and infotainment systems.

Regarding consumer electronics, CEAMA President Eric Braganza’s chip shortage is “the biggest challenge facing the consumer electronics industry, as price increases are to be expected.”

Offering the perspective of the Consumer Electronics and Appliances Manufacturers Association (CEAMA), he said at the moment, the industry has not seen an immediate effect on the supply side due to the shortage. .

“However, as we move into 2022, there is a good chance that a chip shortage will affect supply and lead to higher prices for finished products. We have seen this in global markets before and the same thing. could occur in the domestic market due to the domino effect, ”Braganza said.

Expressing similar views, Prachir Singh, senior research analyst at Counterpoint Research, said the Indian industry was relatively less affected in terms of product availability due to the global component shortage in the first half of the year.

“However, this crisis is likely to have an impact on the Indian manufacturing supply chain after the holiday season … In terms of pricing, we have seen that the prices of several product segments have increased slowly over the years. in recent months.

“This trend is also expected to continue over the next few quarters,” Singh said, adding that price increases due to component shortages would impact consumer demand in the price-sensitive Indian market.

Confirming the development, Super Plastronics Pvt Ltd (SPPL) CEO Avneet Singh Marwah said the chip shortage issue led to “a massive price hike” as there was a 35% rate hike. % last quarter for high definition and high definition. definition chips, followed by 30 percent more in the next quarter.

For 4K TVs, there was a 50 percent price increase with a minimum 60-day delivery time.

The company, which licenses brands such as Blaupunkt, Thomson, Kodak, Westinghouse and White-Westinghouse for the sale and manufacture of LED televisions and other products, predicts that the industry will face production problems at the future.

“Television production will be halted during the months of November and December. Production may be affected by 20-30% in the next quarter, this could continue until the end of 2022,” Marwah said.

The semiconductor is an indispensable part of modern electronic devices, ranging from household appliances to laptops, smartphones and cars. Its demand exploded during the COVID-19 pandemic as people were forced to work from home, fueling demand for electronic devices.

The pandemic also boosted demand for cars, as people preferred personal mobility to shared or public transportation due to safety and health factors.

Som Kapoor, EY India Automotive Partner, said: “The semiconductor shortage continues to hit the production of electronic devices, from cars to computers to consumer durables. . ”

From the perspective of the automotive industry, it has been a double whammy where both the use of semiconductors is increasing day by day with improved infotainment features, sensor based features, etc. and original equipment manufacturers (OEMs) are struggling to keep up with the growing demand when launching new feature-rich models, he added.

The crisis, however, offers a glimmer of hope for the Indian manufacturing sector.

“There is a huge opportunity in India for semiconductor manufacturers to invest, not only for the captive automotive market, but also to meet the demands of other consumer goods and electronics sectors,” said Menon of SIAM.

Regarding the outlook, Kapoor of EY India said: “Although significant capacity additions are planned around the world, given the concentrated and complex supply chain, the problem is likely to persist in the future as well. immediate.”

“A government-backed cross-sectoral working group approach can help alleviate concerns from both a short and long term perspective,” he added.

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