The 2021 ACMA Annual Session gave us some crucial insights into the automotive components industry, especially the shortage of semiconductors. Vehicles use semiconductors for various purposes, like the infotainment system, safety systems, autonomous features, etc. Semiconductors are also used in electric vehicles, which India is pushing hard to transition to.
During the ACMA Annual session, Prashanth Doreswamy, the Country Head for Continental India and MD for Continental Automotive, in a panel discussion with other industry experts, said, “The shortage of semiconductors could spill over to 2022, and in some parts, even 2023.” Looking back at what happened, Doreswamy said, “If we look at the usage of microcontrollers (MCUs) in an average vehicle, it can have anywhere between 20 to 100 MCUs. As an industry, we missed two adjacent trends. One was the growth in the non-auto industry, as there was a huge demand for laptops, IoT devices, phones, and electronics.”
“The second was in the process of being very lean, most of the semiconductor manufacturers had sub-contracted the wafer manufacturing to others, and we ended up with one place with 56% of the automotive requirement. These are the two trends the automotive industry missed.” Speaking about an earlier situation, the Head of Continental says, “We had a similar situation ten years ago. In 2011, when there was a Tsunami crisis in Japan, as an industry, we did learn a lot. Going forward, we need to change the way the automotive industry works.”
He adds, “It takes around 2 to 6 months to manufacture wafers, and then it moves on to be made into semiconductors. Somewhere in the process, someone was holding a huge inventory and when the crisis started, those semiconductors were sold to the non-automotive industry, and that’s where we got into the problem.” He said, “More capacities are being added. However, the system is so dry that a small jerk is causing an impact at the OEM’s end.”
He said how the snowstorm in Texas and the Covid situation in Malaysia also slowed down the manufacturing process of semiconductors. Doresway said, “To be honest, we have to live with this (semiconductor shortage) in 2021, we may see a small improvement in 2022, and we can expect to see a spillover of the shorage in 2023 as well.”
Speaking about the same from SIAM’s perspective, Vipin Sondhi, Vice President, SIAM and MD and CEO of Ashok Leyland, said, “We have learnt many lessons in the past 18 months, and the semiconductor shortage is one such lesson. We can look at it in two ways — one, as SIAM, work with the government, and the two, what we can do as an industry.” He added, “SIAM has reached out to the Ministry of External Affairs to ensure India needs its fair share of semiconductors. We have reached out to the Commerce Ministry to make sure prices have not gone up, and we are working with the Ministry of Shipping for additional containers for the automotive industry. These are what we are doing with the government.”
Speaking about what SIAM is doing as an industry, Sondhi said, “We need a dynamic master production plan, which SIAM is working on, that is testing all of us. In the long-term, we have no option of protecting ourselves as a country to protect ourselves from semiconductor shortages. We have to stay with this, but find whatever solutions we can.”
The semiconductor shortage did not affect the entire automotive industry, though, some were unaffected. For example, Mahindra’s tractor division did not feel the brunt of the semiconductor shortage, as tractors do not use them. While most of the industry had a decline in sales and manufacturing difficulties, the tractor industry posted growth.
Such a situation rises many questions. One among them is why don’t automakers start manufacturing semiconductors themselves, or SIAM as a whole do it? Give the fact that automotive manufacturers are not the primary customers, it does not suit the business module.
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