Semiconductor shortage forces automobile production cuts

pIf a once-in-a-century pandemic and a historic recession were not enough Indiarsquos hard-pressed automobile sector has now run into yet another speedbumpppOn Jan 18 American automaker Ford said it will extend shutdown at its manufacturing plant in the southern Indian city of Chennai for seven more days due to anbsp globalnbspshortage in the supply of semiconductors The shutdown which started onnbspMarch 21 last year was originally planned to last only a few weeks The company which has two factories in Indiamdashone in Tamil Nadursquos Chennai and the other in Sanand in Gujaratmdashexpects the issue that is affecting the entire automotive industry to continue for at least the first half of 2021ppLast month homegrown auto major Mahindra amp Mahindra MampM also said it was expecting a reduction in production and sales during January-March due to the scarcity of semiconductors Globally the shortage has forced auto firms like Fiat Honda and Nissan to cut theirnbspvehicle productionppSemiconductors or microprocessors are the chips that control critical commands such as releasing airbags audiovideo entertainment navigation collision detection system and switching on air conditioning remotelyppThe single reason for the sudden shortage of semiconductors is the disruption in global supply chains due to the coronavirus pandemicppldquoLarge automobile manufacturing nations such as China increased their auto production volumes much faster than expected therefore raising the demand for more of such chipsrdquo said Vahishta M Unwalla research analyst with credit agency firm CARE RatingsppShe further explained that while Covid-19 led to volatile forecasts and disruptions in the global supply chain and planning of semi-conductors the demand from non-automotive sectors like consumer electronics escalated recently due to the rise of 5G connectivityppCarmakers like MampM source their semiconductor from the worldrsquos largest auto-part supplier Bosch While others like Honda Toyota Hyundai Daimler Volkswagen Nissan and Tata Motors have separate arms that make semiconductorsppLast year in DecembernbspBoschrsquos India unit had flaggednbspthe acute shortage of imported components signalling that it will be unable to cater to the demand of the countryrsquos auto sector Bosh had also blamed the need of switching over to 5G connectivity for the semiconductor shortage The chip shortage has also reportedly forcednbspUS-based Applenbspto push back its flagship iPhone productionppThese reasons aside the timing of the crisis is particularly damaging for the Indian auto sectorppThe Indian auto sector had just aboutnbspstarted to see some recoverynbspafter months of low demand first due to the coronavirus lockdowns and then because of the pandemic-triggered economic crisisppNot a single car wasnbspsold in India innbspAprilnbsplast year when the country was in lockdown which nearlynbspbroke the backbonenbspof the auto industry Even after the lockdown was lifted demand did not immediately pick up It was only in the festive months of October and November when the industry finally sawnbspsales risingppNow the shortage of microprocessors has put the sustainability of this recovery at riskppUnwalla expects the severe shortage in supply of semiconductors to get resolved only after a ldquoconsiderable delayrdquo Listing out the solutions she said the option of importing from multiple manufacturers can be considered Car markers that have multiple component suppliers will be in a better position to face the current situation So far auto firms such as Maruti Hyundai and Tata Motors have claimed that the shortage hasnrsquot impacted their production Skodarsquos India unit also said that it has remained unaffected due to the ongoing shortage ldquoAs the shortage of semiconductors is expected to be addressed within the next four to six months we are unaffected having adequate stocks to last the restoration of suppliesrdquo the companyrsquos spokespersonnbspsaid in Decemberp