Automotive players need to work wisely to meet required semiconductors demand: EY Report

Stating that for semiconductors, automotive OEMs (Original Equipment Manufacturer) compete with other industries like IT, consumer electronics, mobile and medical equipment that witnessed unprecedented demand during COVID-19, the report said weak semiconductor supplies have hit car sales in India.

By:Updated: Feb 17, 2021 4:38 PM
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With the global semiconductor industry finding it hard to cater to increased demand, automotive players will have to wisely work to get hold of the required demand of semiconductors for their continued survival and growth, according to a report by consultancy firm EY. Automakers would need modern day intelligent digital planning solutions to assess risks in advance and the ones who do this will mitigate their risks better and win more often in the market, said EY. Stating that for semiconductors, automotive OEMs (Original Equipment Manufacturer) compete with other industries like IT, consumer electronics, mobile and medical equipment that witnessed unprecedented demand during COVID-19, the report said weak semiconductor supplies have hit car sales in India.

While demand for automobiles went down initially due to decreased consumer mobility due to work from home and lockdowns during the onset of the pandemic, on the contrary the pandemic also witnessed an increase in demand of high-end TVs, mobile phones, entertainment systems and laptops to serve the “forced to stay at home consumers”, it added.

“As the world began to recuperate from the impact of COVID-19, auto OEMs started to witness steady increase. At present, the positive demand of automobiles has started to come back and we see that the semiconductor industry is finding it hard to cater to the increasing demand,” the report said. It further said: “Automotive players will have to wisely bring back the ball of the pendulum on their side to get hold of the required demand of semiconductors for their continued survival and growth.”

Commenting on the situation, EY India Partner and Automotive Sector Leader Vinay Raghunath said: “Today, semiconductors are an essential part of the DNA of new age gadgets spanning smartphones, laptops and cars. The post-COVID demand growth across sectors has created a sudden splurge in demand for semiconductors which is another supply chain constraint that automotive manufacturers need to prioritise and address.”

While the current semiconductor shortage will certainly revive with time, EY India Partner and Supply Chain Leader Yugesh Aglawe however said other similar disruptions may occur again. “Automobile manufacturers should make use of rapid what-if scenario modelling capabilities that are available in modern day intelligent digital planning solutions to assess such risks in advance. The ones who do this will mitigate their risks better and win more often in the market,” Aglawe added.

The EY report said with semiconductor manufacturing being a complex global intertwined ecosystem, it has led to a supply chain that is vulnerable to macroeconomics, natural disasters and other factors. “Semiconductor companies operate in several different countries and jurisdictions with country specific and international laws relating to health and environment regulations. One such example is the equipment for lithography, a vital step needed for front-end manufacturing, an area where one player commands more than 80 per cent of the market share,” it said. The current semiconductor shortage will certainly revive to meet the increasing demands of the present day, provided it is well collaborated with the latest digital technologies such as analytics, machine learning, artificial intelligence, among others, the report added. This can tremendously help restore the intelligent and smart supply chain. And yet again, the automotive sector will breathe in greener pastures, it said.

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