The global semiconductor shortage does not seem to get addressed any time soon. According to Vinnie Mehta, director general, ACMA, its impact may continue even in 2022. The SIAM and ACMA annual conventions held last week reiterated the need for increasing localisation, particularly with regard to electronic and semiconductor components, where India is a big importer from countries like China, Japan, Taiwan and South Korea.
While the global semiconductor shortage in the automotive industry has thrown a spanner in the works for OEMs and suppliers, the challenge is can India really take this as an opportunity to step up its game. So, “One cannot create capacities so easily. The investments required too are also very different with investors being critically wary of what happens once the demand starts to taper off after the current pent-up demand dies,” says Vinnie Mehta, director general, ACMA, in an interview with Autocar Professional.
“Moreover, it takes about a year’s time for a semiconductor foundry to start producing,” Mehta added.
A typical passenger vehicle generally uses around 1,000 semiconductor chips, essentially driving the ECUs, infotainment and myriad sensors. However, for semiconductor giants like the Taiwan Semiconductor Manufacturing Company (TSMC), revenues from automotive supplies are less than a fifth of their overall business.
The low-hanging fruits
However, in a joint report released in May 2021, ACMA and SIAM had proposed localising 8-12 percent of the electronic imports in passenger vehicles over the next two years, bringing a net reduction of around Rs 1,133 crore in import value of electronics in mass market cars from the FY2020 import value of Rs 3,429 crore.
Semiconductor chips currently form about 5-8 percent of the total constitution in passenger vehicles in India, but with growing levels of electronics, driven by connectivity and advanced safety systems taking precedence, their composition is only increasing. The recently-launched Mahindra XUV700 has brought ADAS features such as adaptive cruise control and autonomous-emergency braking to the sub-Rs 20 lakh price segment.
The ACMA-SIAM report proposes localisation of low-technology sensors such as rear parking sensors, cabin temperature sensors and infotainment parts such as speakers, bluetooth microphones and antennae in the first phase, before proceeding to the next set of critical components like wheel-speed sensors, oxygen and camshaft sensors in the next phase.
Lowering the duty on raw material imports for setting up a PCB industry in India and consolidation of semiconductor requirements across sectors to cater multiple industries will be crucial for driving semiconductor localisation in the country.
Mehta explained that the West, including Europe and the US is facing a very big challenge with respect to the semiconductor shortage, however, “the concern for Indian OEMs is not that deep simply because the electronic content in Indian vehicles is not as high at the moment.”
“But the shortage is a reality and we have to deal with it,” he remarked while talking about the worsening situation, which was sparked off by the advent of the Covid-19 pandemic last year when work-from-home and a relentless spree of nationwide lockdowns pushed automakers world over to drastically truncate their demand projections to chip foundries.
Headwinds through recovery
An unexpected bounce back for the auto sector driven by the need for safer personal transportation is what has caught the industry off guard. Suzuki Motor Corporation’s Indian plant in Gujarat, for instance, had recently reduced production down to a single-shift on three consecutive Saturdays of August citing chip shortage.
As per sources, waiting period for the automatic variants of Maruti Suzuki models such as the XL6 and Baleno are close to three- to four months while in case of Mahindra & Mahindra, cars devoid of infotainment systems are being shipped to dealers. It is also understood that diesel cars are more adversely impacted than petrol due to the higher semiconductor composition, particularly to meet the BS VI emission norms.
Hyundai Motor India, affected by this global supply chain disruption, is “putting collective efforts with its vendors to mitigate the situation”.
The “waiting period between two and eight months in the passenger vehicle segment on an average across manufacturers” is impacting the retail side too, according to Vinkesh Gulati, president of Federation of Automobile Dealers Associations of India.
As per Mehta, “The situation seems protracted and it doesn’t look like weaning off before 2022.”