Global Semiconductor Chip Shortage and Indian Automobile Industry

Semiconductor chip shortage is making rounds nowadays in the Indian automobile scenario. Everyone is talking about how the chip shortage will be creating a void between the producers and consumers. Well, let us first understand what a semiconductor chip is.

A semiconductor is a silicon-based material that conducts electricity better than an insulator like glass but not as well as a pure conductor like copper or aluminium. Semiconductors, often known as semis or chips, are used in a wide range of items, including computers, cellphones, appliances, gaming gear, and medical equipment.

In simpler words, the semiconductor chip is the brain of your electronic device. Nowadays, almost every electronic device runs on a semiconductor chipset. Even the device you are reading this article on is running on semis.

Since the advancement in the electronics provided on vehicles, the demand for semiconductor chips has skyrocketed. And with the increase in the demand for vehicles, somehow, semiconductor supply has hit a low.

According to Economic Survey 2022, the carmakers are sitting on the books of 7 lakh pending orders as of December 2021. And this is not because of rising petroleum prices, but due to chip shortage. 

For example, the very popular brand KTM is facing huge issues in manufacturing their flagship Duke 390 and Adventure 390 due to chip shortages. Almost every KTM showroom in India is void of Duke 390 and Adventure 390.

Now you would ask, what is the deal around manufacturing semiconductor chips altogether? Well, for a single chip, it takes around 2 months to be ready to be implemented on electronic devices. Manufacturing chips is a tiring process and can take a worse hit due to the ongoing Russia-Ukraine tussle.

Russia and Ukraine now contribute a significant quantity of neon gas and palladium, both of which are utilised in the manufacture of semiconductors such as memory chips. According to Japanese media, the situation in Ukraine may have an impact on semiconductor production, which is known as “the rice of the industry.”

Since India is slowly getting the taste of EVs, the industry has taken the worst hit due to chip shortage. The EVs mostly run on chips, and a shortage in the supply has created a waiting period, unrealistic for the customers.

Though there are a handful of countries that manufacture semiconductor chips, India too is planning to jump on the bandwagon. Last year in December, the Government of India rolled out a PLI scheme to enable in-house semiconductor chips production. 

Since the automobile sector has taken the worst hit due to the chip shortage, all we can do is join the waiting queue to get the pleasure of driving our favourite vehicle.