Growing semiconductor shortage remains a global concern

Semiconductors, or chips, have properties that are somewhere between conductors and insulators. Usually made of silicon, they are used to power a wide range of devices - cars, laptops, smartphones, household appliances and gaming consoles. These semiconductors perform a host of functions such as powering displays and transferring data. So, a supply crunch has a consequent impact on sales of cars, fridges, laptops, TVs and other electronic devices. In India, the number of investors in cryptocurrencies has rapidly grown over the past year, and is now distorting how semiconductors are used. Global leaders and executives at multinational corporations are worried about the global shortage of semiconductors which has hit manufacturing and sales in numerous countries and no early solution is in sight.

The unforeseen situation is not expected to improve anytime soon, and supply constraints could potentially continue into 2023. Though companies are on a war footing to ramp up production, the problem will likely worsen before reaching a resolution. Intel's chief executive, Pat Gelsinger, recently warned that the worst is yet to come. The surge in sales for electronic devices during the pandemic created a huge demand for semiconductors. But COVID-19 is not the only factor behind the shortage. The chip shortage has now become a talking point not just between companies and governments, but also between leaders of countries. Western countries have expressed a need to shift manufacturing within their countries and become self-reliant.

Another key reason is the tense relationship between the United States and China is also a factor, since many US companies do business with Chinese companies. For instance, Huawei, which supplied to American chip makers, has been blacklisted by the US government. Production of laptops, tablets, smartphones and other electronic devices has been impacted by the shortage of semiconductors.

According to data from Society of Indian Automobile Manufacturers (SIAM), automobile wholesales in India declined 11 percent year-on-year in August. When we see the data points, Maruti Suzuki, India's largest carmaker, has seen about 60% cut in production in September due to shortage in supply of semiconductors. Mahindra and Mahindra said it had cut output by 20-25 percent in September due to the semiconductor shortage. The automaker also planned seven "no production days" at its automotive plants during the month. Kenichi Ayukawa, the President of the SIAM recently said while the chip shortage is challenging, it does provide an opportunity for the Indian automobile industry. Electric vehicles maker Tesla had in August announced that it is developing a "Dojo" chip to train artificial intelligence networks in data centres. Tesla CEO Elon Musk said the Dojo chips should be operational next year. Going forward, other automakers will also eventually develop and/or manufacture their own chips.