Home / Industry / Manufacturing /  Chips scarcity to ease by 2H 2022
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NEW DELHI : Consumer electronics makers expect the semiconductor shortage to ease by the second half of 2022, pinning their hopes on plans of global chipmakers to roll out more fabrication units abroad.

Meanwhile, they have adopted strategies to counter the effects the supply constraint is having on manufacturing and retail sales.

The semiconductor industry has been unable to keep pace as the unexpected surge in demand for personal computing devices for remote work and supply-chain disruptions during the pandemic led to long wait times for companies that make mobile phones, computers and cars and appliances. User industries are hoping that expanding chip production capacities will ease their troubles as demand hasn’t shown any sign of moderation.

The shortage has increased lead times to as high as three months for consumer electronics such as laptops and smartphones makers, which is a relatively softer hit than auto sector, where the shortage has increased lead times to as much as nine months, said Satya Gupta, adviser at the India Electronics and Semiconductor Association. “The supply chain should ease in the second half of 2022, as fab capacity being set up by players like TSMC, Samsung and Intel kick in." India’s projected annual demand for 28 nm semiconductors nodes and higher is about $25 billion, as per government estimates, and is 5% of global demand.

Industry executives and experts said brands have cut output by as much as 30%, while others have delayed launches or recalibrated order books. “We’re only committing to customers as per the supplies coming in... we’re checking with the supply chain," said A. Gururaj, managing director of Optiemus Electronics Ltd, which makes smartphones, laptops and wearables.

“Gradual easing of supply constraints should take place by June, and it should ease fully by year-end," he said, adding that an increase in volumes of semiconductor supplies is expected by March.

Smartphone maker Realme said the industry has had to change its strategy. “We are proactively collaborating with prominent chipset manufacturers while also seeking collaborations with emerging manufacturers who can provide best performance processors," said Madhav Sheth, CEO at Realme India.

He said the company expected chipset shortages to ease by the second quarter of 2022.

Industry watchers said that even as manufacturers matched production to supplies, sales are hit because firms have raised prices of some products or cut product lines to focus on high selling devices.

“There is a shortage of devices—some smartphones, laptops are not available, and prices of many models have been raised... this will go on into 2022," said Navkendar Singh, research director at IDC India.

Seth added that the chipset shortage has changed the launch plans of smartphone brands, including Realme.

“Despite the industry’s best efforts to absorb the pricing internally, the operating prices of a few items had to be increased to ensure long-term sustainability, as none of the brands can absorb it all," he added.

The industry moves follow efforts by the government to take a long-term view of the problem, aiming to address it through a 76,000-crore policy boost, even as it expects the situation to normalize in eight months.

Earlier this month, the government introduced an incentive programme for semiconductor and display manufacturers to position India as a production hub. The scheme for setting up semiconductor and display fabrication units will extend financial support of up to 50% of the project cost to eligible applicants and 30% of capital expenditure support to companies in compound semiconductors and semiconductor packaging.

The scheme has begun attracting large players, including in areas of design, compound semiconductors and packaging, minister of state for electronics and information technology Rajeev Chandrasekhar told Mint on Tuesday

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