The spillover of the semiconductor shortage in the Indian automotive industry seems to have no end. According to the Economic Survey 2022, this shortage translates to a cumulative pendency of over 7 lakh orders for the car manufacturers.
Semiconductors today play a crucial role in the production of internal combustion engines and are an integral part of all kinds of sensors and controls in any vehicle.
Citing a report by investment bank Goldman Sachs 2021, the survey document said that the supply chain disruptions in the semiconductor industry have spillovers in over 169 industries. The report stated that, “The manufacturing of semiconductors requires large amount of capital and has an average gestation period of 6-9 months. Moreover, it has a fairly long production cycle of about 18-20 weeks. Hence, any recovery from the supply chain disruptions will be a slow and costly affair.”
Further, the report stated that microchips and semiconductors account for nearly 4.7% of value added by the automotive industry. With the delay in supply, the average lead time in the automotive industry for 2021 has been around 14 weeks globally.
The Economic Survey further pointed out that India has also experienced similar trends in the automobile sector. According to the Society of Indian Automobile Manufacturers’ data, carmakers sold 2,19,421 passenger vehicles in the domestic market in December 2021, which was 13% down year-on-year.
The survey stated that, “This is not a demand problem but a supply-side issue. The information form various car manufacturers’ website reveals a cumulative pendency of over 7 lakh orders as of December 2021.”
The Economic Survey also pointed out the efforts on the par tof the government to boost semiconductor production in India. The central government recently approved an outlay of Rs.76,000 crore for the development of semiconductors and display manufacturing ecosystems.
While the automotive and several others are dealing with delayed supply of semiconductors, the PLI and other schemes will boost semiconductors to help domestic companies to overcome the challenges posed by COVID-19. It will also help assist them to become globally competitive especially in chip making, said the survey.
