Global chip shortage will hit Indian businesses hard this holiday season


The semiconductor shortage has been a major topic for some time now. While several global companies producing chip materials have claimed the shortage could last until 2023, Indian companies over the coming holiday season may have to bear the brunt of the lack of supply. Small microchips are an integral part of the production process of most new age electronics, including household appliances, communications devices, transportation systems, and other critical infrastructure such as medical devices.

This coming quarter of the year is generally proving to be the most profitable time for most businesses across the country each year. With higher footfall and higher sales, businesses are waiting to reap that consumer traffic. But as the chip shortage hangs around the world, companies involved in the manufacture of cars, electronic gadgets and consumer durables are not sure of a hopeful future, due to their staggering production lines.

The automotive industry in India is already under massive pressure due to the global chip shortage. About 10% of the overall demand for semiconductors in India comes from the automotive industry. The shortage gave way to production cuts, price increases, delivery delays and declining discount margins. The already widespread loss is expected to be further compounded by growing demand during the approaching holiday season.

The Federation of Automobile Dealers Associations of India (Fada) recently expressed concern over the current shortage of chips and called it a “crisis in its own right”. Fada also suggested that to help automakers struggling to supply vehicles to dealerships, personal vehicle sales could go off the rails during the holiday season.

Even though small manufacturers of products like smartphones, televisions, laptops and the like will not face such a volatile position as the automotive industry, the concern is still evident. Supplies have also become scarce for these companies, and experts say a sharp increase in demand can hurt sales during the holiday season. Not only mobile phones and televisions, but the supply of many other high-end electronic products, including game consoles, have also been affected due to the current circumstances.

Prolonged congestion at Chinese ports combined with container shortages only added to the disrupted situation, delaying the supply of finished products and materials used for local manufacturing.

Arjun Bajaaj, Director of Videotex International Group, said: “The shipment of raw materials for the manufacture of televisions to India has been delayed due to traffic congestion at Chinese ports. The time it takes for raw materials to arrive in India has dropped from 28 to 30 days to 50 days now. “” This resulted in a delay in the delivery of goods and a complete overhaul of production plans. In addition, for this reason, the cost of sea and air freight has been multiplied by 7 to 8 compared to what it was before Covid, which led to an increase in the overall cost of freight, ”he said. added.

Most retailers believe that if the situation does not improve by the next month, the supply shortage could get out of hand. This would likely force sellers to raise the prices of their products instead of offering discounts at such a crucial time.

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