Semiconductor shortage to stretch into 2022: Crucial for India to take big steps now

'Setting up new plants for semiconductors is imperative and an immediate need of the hour so India is not left behind when the market does grow to $100 billion.'

By:Updated: Oct 07, 2021 12:03 PM
A customer looks at a car at a Maruti Suzuki dealership (Image for representational purposes only)

India’s automobile sector is currently undergoing a very relevant transition into connected and electric mobility. This means that dependence on semiconductors or chips is on the rise. This is at a time when the global markets are grappling with a shortage. Express Mobility held its very first Connected Mobility Summit on 6th October which saw an in-depth discussion over the subject. The panelists clarify that the semiconductor shortage would stretch well into the next year but there are some steps India can take to ensure supply in the long term.

2021 Connected Mobility Summit’s panel discussion on Semiconductor Shortage saw brainstorming by three industry experts – Vinkesh Gulati, President, FADA and Director United Automobiles, Girish Kamala, Sr Director & Country Head Sales – Automotive, Infineon Technologies India Pvt Ltd, and Anurag Garg, Managing Director & Country Head, Vitesco Technologies.

The supply of higher-spec variants of passenger vehicles started to be affected in October last year due to the semiconductor shortage. Within a year, the waiting period on some models has gone up from two months to 11-12 months. While earlier only higher-spec vehicles were affected, now it includes everything starting from an entry-level Maruti to feature-loaded luxury cars. As a car dealer or as a car manufacturer, the divide between demand and supply is very wide, the industry is not in a good shape, says Vinkesh Gulati.

Also read: Connected Mobility Summit: ‘ADAS – Connecting Transportation for Improved Safety’ panel discussion highlights

The transition from BS4 to BS6 increased the demand for semiconductors since more electronics were involved, plus the boom in features in cars (safety and convenience) added to that demand. Reports suggest that the semiconductor market today stands at $25 billion in India and is expected to grow to $100 billion by 2025.

About setting up new semiconductor plants in India, Girish Kamala explains that to set up a new such plant would take about 18 months to two years. More than the investment, what’s even more relevant is to be able to create an ecosystem that includes the front end (manufacturing of wafers) and the backend (the packaging). From India’s perspective, it makes more sense to invest in backend manufacturing.

He adds that a vehicle uses various kinds of semiconductors, so a single semiconductor manufacturer can focus on only one kind.

All of these aspects combined mean that setting up new plants for semiconductors is imperative and an immediate need of the hour so India is not left behind when the market does grow to $100 billion. However, it is not the solution for the short-term or to improve the current situation with the global shortage. Countries like Malaysia started their semiconductor manufacturing a couple of decades ago.

Anurag Garg underlines that the delay in product supply is expected to continue until the first half of FY2022 or beyond. India first needs to streamline its current strategy for the short term before moving on to becoming ‘atmanirbhar’ (self-reliant).

Latest from the global semiconductor shortage

Malaysia’s help is needed to resolve the global shortage of auto semiconductors, especially when it comes to packaging, a sector affected by the country’s COVID-19 curbs, Taiwan Economy Minister Wang Mei-hua said.

Taiwan, as a major chip producer, has been front and centre of efforts to resolve the shortage, which has idled auto plants around the world.

Speaking in an interview late on Thursday at her ministry, Wang told Reuters that Taiwan alone could not sort out the problem because the supply chain is so complex.

“The bottleneck in fact is in Southeast Asia, especially Malaysia, because for a while the factories were all shut down,” she said.

The problem was especially acute with auto chip packaging, with companies in Malaysia providing services not offered by Taiwanese firms, Wang added.

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