Pandemic effect: Chip manufacturers pick phones, laptops over automobiles...

Pandemic effect: Chipmakers prioritize phones, laptops over cars, banks

As India moves to shore up its own semiconductor manufacturing ecosystem, sectors such as autos and banks say chipmakers are discriminating — due to supply disruptions caused by the pandemic — in favor of clients who need high-value chips versus lower prices. sizes used by car companies and banks.

This assumes significance given the Indian Banks Association (IBA) representation to the government seeking the intervention of an antitrust panel to address the chip shortage that is affecting the issuance of credit and debit cards. But semiconductor industry executives attribute that to market forces. It is said that once the pandemic broke out, certain products such as laptops and smartphones were prioritized over others, which was mainly triggered by measures taken by consumer segments such as car companies.

This has led to OEMs (Original Equipment Manufacturers) in certain sectors freeing up slots in manufacturing units allocated to car manufacturers to meet demand from other high-value items such as laptops, smartphones, headphones, etc., whose demand has increased when people started working Home.

“Just as we reserve railway tickets in advance and there is a waiting list, so one has to reserve slots for the chips to be made in advance. Failure to do so will forfeit your slot. A lot of auto companies canceled their slots (when the pandemic started) with the assumption that they wouldn’t require it,” Sanjay Gupta, vice president and managing director for India at Netherlands-based NXP Semiconductors, told The Indian Express. NXP Semiconductors is one of the three largest suppliers of semiconductors to automotive companies in the world.

“It was because having slots would mean you would pay for some of the expenses. Running the factory requires millions of dollars a day. Auto companies believed that deliveries would not be required in the first two quarters of 2020 and freed up those slots. But there was another phenomenon that was happening — work from home, study from home, gym from home, basically everything from home. No one predicted this phenomenon. Digitization, which was expected in a 5-10 year time horizon, literally happened in one quarter,” Gupta said, adding that once demand for cars came back, it was difficult for automakers to get those slots back. “The car companies barely got their slots back, and whatever they could get back, they got it at a higher price.”


Car companies release slots

Automakers and banks say chipmakers prefer to sell high-end chips to laptops and phone companies rather than the cheaper ones they need. But semiconductor companies say that during the pandemic, auto firms, whose demand fell, freed up their “chip-making” slots due to the lockdown – and are only now coming back.

For car companies, this meant a huge backlog of orders and even the limitation of some functions due to the lack of necessary electronic parts and components.

Meanwhile, India saw 14.85 million shipments of personal computers such as laptops and desktops in 2021, up 44.5 percent from 2020, according to data provided by the International Data Corporation (IDC). Even though PC shipments started to slow in 2022, some sectors are still affected by semiconductor shortages.

In parallel with this, the government’s pressure is concentrated on the production of semiconductors. Last week, a joint venture between the Vedanta Group and Taiwan’s Foxconn announced the setting up of a semiconductor and imaging unit in Gujarat. They also received proposals from Singapore-based IGSS Ventures and ISMC, which is led by Abu Dhabi-based Next Orbit Ventures Fund.

The Union Cabinet last December approved a Rs 76,000 crore plan to set up a semiconductor and display manufacturing ecosystem. Under the plan, the center has prepared incentive support for companies engaged in silicon semiconductor manufacturing, display factories, compound semiconductors, silicon photonics, sensor factories, semiconductor packaging and semiconductor design.


I am Sanjit Gupta. I have completed my BMS then MMS both in marketing. I even did a diploma in computer software and Digital Marketing.

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