Current Affairs

Issue

The shortage of semiconductor chips has forced carmakers and bike makers in India to cut their production.

 

Background

The world is witnessing a hangover effect of the first Covid wave when many semiconductor industries were shut due to worldwide lockdown.

 

Details

• Major chip-making industries are located in the US, Japan, South Korea, Taiwan and China. Due to lockdown, the facilities were forced to shut down.

• The effect of shortage is long-term as it creates follow-up famines of semiconductor chips. As demand increase, the production cannot match up to it.

 

Impact of shortage

• Car manufacturers are the largest consumers of semiconductor chips but are not receiving enough units to resume production.

• The chip lead time has increased to 17 weeks post the recovery phase. The lead time is the time between when a chip is ordered and when it is delivered.

• The percentage of electronic materials in a car has gone up to 40 percent. Bulk of the electronics is made up of semiconductor chips.

 

Response of Indian auto-makers

Indian companies such as Mahindra & Mahindra, Tata motors, Bajaj auto, and Ford automobiles have delayed launch of new products due to shortage of semiconductor chips.

 

Global response

• Global automakers have adopted temporary measures to reduce consumption of semiconductor chips.

• Many digital features such as rear-view display, navigation system, larger view screen etc have been cut-off from new models.

 

Semiconductor chips

Semiconductor chips are electronic components that are used in manufacturing products such as computers, gaming hardware, smartphones, appliances etc.