Semiconductor Chips Shortage in Manufacturing Sector

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    Recently, India-based car manufactures and premium bike makers started  curtailing  production across various categories due to shortage of inputs, especially semiconductor chips.

    Semiconductors 

    • A semiconductor is a material product usually composed of silicon, which conducts electricity more than an insulator, such as glass, but less than a pure conductor, such as copper or aluminium. Their conductivity and other properties can be altered with the introduction of impurities, called doping, to meet the specific needs of the electronic component in which it resides. 
      • Also known as semis, or chips, semiconductors can be found in thousands of products such as computers, smartphones, appliances, gaming hardware, and medical equipment.
      • These devices find widespread use in almost all industries especially in the automobile industry
    • Semiconductor chip: A semiconductor chip is an electric circuit with many components such as transistors and wiring formed on a semiconductor wafer. An electronic device comprising numerous of these components is called an “integrated circuit (IC)”. 
    • Electronic parts and components today account for 40% of the cost of a new internal combustion engine car, up from less than 20% two decades ago. Chips account for a bulk of this increase.

                                                      Image Courtesy : Toppr

    Reasons for shortage

    • Beginning of the Covid-19 pandemic
      • The trigger point was the beginning of the Covid-19 pandemic and the subsequent lockdowns across the world that forced shut crucial chip-making facilities in countries including Japan, South Korea, China and the US.
      •  A key feature in a chip shortage is that it causes cascading effects, given that the first one creates pent-up demand that becomes the cause for the follow-up famine.
    • High Demand 
      • With the onset of the coronavirus pandemic, higher demand for mobile phones, laptops, gaming consoles, electronic products and the usage of the internet has increased the requirement for semiconductor chips.

    Impacts 

    • Consumers of semiconductor chips, which are mainly car manufacturers and consumer electronics manufactures, have not been receiving enough of this crucial input to continue production. 
      • Chip shortage is measured in chip lead time, which is the gap between when a chip is ordered and when it is delivered.
        •  The chip lead time increased to 17 weeks in April, from around 12 weeks at the beginning of 2020. . 
    • Delays in the launch 
      • Mahindra & Mahindra is factoring in some delays in the launch of its flagship Mahindra XUV500 and its new Scorpio, with the company flagging concerns over seamless availability of raw materials, especially semiconductors. 
    • Discarding features and high-end electronic capabilities
      • Some companies have reportedly started discarding features and high-end electronic capabilities on a temporary basis to deal with the chip shortage. 
      • Japanese carmaker Nissan is said to be leaving navigation systems out of thousands of vehicles, while French company Renault has stopped offering a larger digital screen behind the steering wheel on its Arkana SUV.
      •  Amsterdam-headquartered Stellantis has modified its Ram 1500 pickup vehicle so that the digital rear-view mirror that usually comes standard is now available only as an upgrade option.
    • Cost 
      • The global semiconductor chip shortage will cost automakers $110 billion in lost revenues this year, up from a prior estimate of $61 billion.

    Conclusion & Way Forward 

    • The present shortage of inputs, especially semiconductor chips in the automobile industry seems to be a temporary phase. Various initiatives of the government like Production Linked Incentive scheme will provide a much needed trigger.
    • The Prime Minister’s call for an ‘Atmanirbhar Bharat’, have rejuvenated hopes of a rise of the indigenous electronics industry, gradually allowing India to be truly self-sufficient.

    Source :IE

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