Electronics makers expect chip shortage to ease up by late 2022

Consumer electronics makers are expecting semiconductor chip shortage to ease up by the second half of next year but have adopted strategies to counter the effects the supply constraint is having on manufacturing and retail sales.

According to industry insiders and experts, several brands have lowered production by up to 30%, while some have delayed new launches are recalibrated order books, while keeping a close tab on supplies from component vendors.

“We’re only committing to customers as per the supplies coming in… we’re checking with the supply chain,” said A Gururaj managing director at Optiemus Electronics Limited which makes smartphones, laptops and wearables.

“Gradual easing up of the supply constraints should take place by June and it should ease up fully by the year end,” he told Mint, adding that a rise in volumes is expected by March next year.

Smartphone maker Realme said that industry had to change its strategy keeping in view the semiconductor shortage.

“We are proactively collaborating with the prominent chipset manufacturers while also seeking collaborations with burgeoning chipset manufacturers who can provide the best performance processors,” said Madhav Sheth, CEO at Realme India.

He added that the company expected chipset shortages to ease up by the second quarter of 2022.

Industry watchers said that while manufacturers were calibrating production in tandem with supplies, however consumer sales are getting impacted as companies have raised prices of some products or have reduced product lines to focus on high selling devices.

“There is shortage of devices, some smartphones, laptops are not available for purchase, and prices of many models have been raised… this will go on well into 2022. Companies are taking the supply issues into account and are reducing production, delaying launches and or placing orders only when supplies are ensured,” said Navkendar Singh, research director at IDC India.

Seth added that the chipset shortage changed the launch plans of smartphone brands, including Realme, and impacted the pricing strategy across the industry.

“Despite the industry’s best efforts to absorb the pricing internally, the operating prices of a few items had to be increased to ensure long-term sustainability, as none of the brands can absorb it all,” he added.

While industry has been taking steps to tackle the issue, the government has taken a long term view of the problem and aimed to address it through a ₹76,000-crore policy boost, even as it expects the situation to normalise in six to eight months. The government introduced the incentive scheme earlier this month for semiconductor and display manufacturing ecosystem in the country in a bid to position India as a global hub for hi-tech production.

The scheme for setting up of semiconductor fabs and display fabs in India will extend fiscal support of up to 50% of project cost to eligible applicants, while fiscal support of 30% of capital expenditure will be given to companies in compound semiconductors and semiconductor packaging.

This has begun attracting large players such as chipset maker Intel which said Tuesday that it is planning to set up its semiconductor manufacturing unit in India, while Vedanta Group has said that it will invest up to Rs 60,000 crore to set up chip and glass manufacturing ecosystem in India over the next three years.