Economic Survey 2022: 7 lakh orders for new cars pending due to semiconductor shortage
'Any recovery from the supply chain disruptions will be a slow and costly affair,' the Economic Survey said.
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FollowThe shortage of semiconductor chips has had a spillover in the automobile industry due to which car manufacturers have a cumulative pendency of over 7 lakh orders, the Economic Survey 2020 has said.
'A report by investment bank Goldman Sachs 2021 states that the supply chain disruptions in the semiconductor industry have spillovers in over 169 industries. The manufacturing of semiconductors requires a large amount of capital and has an average gestation period of 6-9 months. Moreover, it has a fairly long production cycle of about 18-20 weeks. Hence, any recovery from the supply chain disruptions will be a slow and costly affair,' the Economic Survey said.
'The report further stated that microchips and semiconductors account for about 4.7 per cent of value added by the automotive industry. With the delay in supply, the average lead time in the automobile industry for 2021 has been around 14 weeks globally. India has also experienced similar trends in the automobile sector. As per data from the Society of Indian Automobile Manufacturers, carmakers sold 219,421 passenger vehicles in the domestic market in December 2021, down 13 per cent (YoY). This is not a demand problem but a supply-side issue. The information from various car manufacturer's websites reveals a cumulative pendency of over 7 lakh orders, as of December 2021.'
The Survey document notes that the government had recently approved an outlay of Rs. 76,000Crore (>US$ 10Bn) for the development of Semiconductors and Display Manufacturing Ecosystem.
The government's intervention was necessitated several companies from diverse industries have been forced to either shut or curtail production in response to the breakdown of supply chains triggered by an acute shortage of semiconductors.Â
The PLI and other schemes to boost semiconductors will not only help domestic companies to overcome the challenges posed by Covid-19 but also assist them to become globally competitive especially in chip making. Semiconductors are an integral part of modern technology used in automobiles and their components, electronic and medical devices. The comprehensive interventions being introduced by the government will aid in the establishment of an ecosystem that boosts semiconductor production in India.
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