Editorial: When the chips are low
The coronavirus pandemic has left a debilitating impact on the global semiconductor industry, an industry that has an equal impact on high-tech users and low-end consumers of electronics. The impact of the acute semiconductor shortage is sure to be felt over the coming holiday season in India due to disruptions and delays in the supply of electronics and also a possible increase in their prices. The impact of the global scarcity of chips is everywhere: automobiles, smartphones, laptops, tablets, consumer durables, game consoles and other electronic products. The crisis in the semiconductor industry has already resulted in lower production, late deliveries, lower discounts and higher prices. Even optimistic estimates indicate that the shortage will last until 2022, resulting in prolonged supply disruptions in various segments. Goldman Sachs analysis suggested that at least 169 industries have been affected by the global chip shortage. The auto industry has been the hardest hit. India is no exception to the enveloping crisis as the domestic auto industry accounts for 10% of global semiconductor demand. Already battered by the disruptions induced by the Covid, the automotive industry will take much longer to recover due to production disruptions due to the shortage of semiconductors. According to the Society of Indian Automobile Manufacturers, Indian auto wholesalers were down 11% year-on-year in August while Maruti Suzuki, India’s largest automaker, will see production drop 60% in September.
Likewise, Mahindra & Mahindra said it will cut production by 20-25% in September due to the semiconductor shortage. The pandemic is not the only factor causing the shortage. The trade war between the United States and China has deepened the crisis. For example, Huawei, the Chinese major that supplied US chipmakers, has been blacklisted by the US government. Supply chain disruptions from the pandemic, a surge in demand for electronics as more people work from home, and lack of investment in chip-building capabilities are just some of them. reasons for the global shortage of chips. And, they cannot be made in the short term because the process is complex and time consuming. Made of silicon, chips are tiny objects that perform a multitude of functions such as powering displays and transferring data. Integrated circuits, chips, transistors, and electronic sensors are constructed from semiconductor materials. They enable key functions such as high-end computing, operation control, data processing, storage, and input and output management. Manufacturing a chip typically takes more than three months and involves giant factories, multi-million dollar machines, and lasers. Many tech companies, like Apple and Tesla, have started developing their own chips, a move that should help alleviate current supply issues.
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