Auto industry still faces challenges on chips frontier: Maruti’ Suzuki's Sunil Kakkar

Even as the chips shortage at an overall level has eased, the industry still has some challenges on this front as it deals with an earlier generation of this key component

Sunil Kakkar, senior executive director, Maruti Suzuki India and the chairperson of SIAM’s Atmanirbharta sourcing group, says that while many of the semiconductor manufacturers are primarily into producing chips which have a nano-metre size of less than 40, the issue of complexity comes into play as some of the chips are still required to be around 40 nanometre or more.

Kakkar was speaking at a panel session during the 62th annual session of Automotive Component Manufacturers Association (ACMA) held in New Delhi on Wednesday. 

For the sake of perspective, the nano-metre size refers to the surface of a chip. The 40 nanometre-and-above chips, which are of older generations, are spread over a larger area while those with smaller nanometres take smaller space, and also provide faster computing speed. While the larger chips are used for comparatively simpler tasks, the smaller ones are typically deployed for the more complex tasks such as electronics and infotainment systems. 

While the move towards smaller chips has helped in freeing up availability of larger chips, the auto industry globally and in India has to compete for supply with other industries as well. "One of the solutions is  that we also need to keep moving forward and manage the switch over to those relevant nanometers where the actual investment is happening or not," said Kakkar. "So, before we can say that it is behind us, that is something we need to be cognisant of. Therefore, it might still be there in the future, particularly with regard to certain characteristics or sizes," he added.

As Kakkar says, one semiconductor fabrication unit, also called a fab, usually takes around 3-4 years’ time frame to come up and costs upward of $4-5 billion, which is why it is important even for semiconductor companies to truly examine what could be the capacity requirements for future. On the demand side, the overbooking for CY23 is still an issue even as chip manufacturers are, at present, operating at full capacity.

Last week, SIAM announced the sector’s production numbers for August which suggested an increase of 25 percent in production as the industry gears up for a festive sales boost thanks to better monsoons and more vehicle offerings. Improved production numbers have been attributed to OEMs’ ability to cope with the chips shortage with many putting in mitigation plans or allocating the use to vehicles heading for exports as in the case of Maruti. Other OEMs have diversified their sources for chips or are offering fewer chip-dependent vehicles.

The issue of chips availability as well as rising raw materials prices including precious metals will likely be discussed at the SIAM annual meeting tomorrow. And while things are apparently quietened on the war front, and oil is just under US$ 100 a barrel, the possibility of a recession in the key developed markets will weigh on OEMs’ minds.