Pandemic Effect: Chipmakers Choose Phones, Laptops Over Automobiles and Banks

As India moves to promote its own semiconductor manufacturing ecosystem, sectors such as automotive and banking allege chipmakers are discriminating – following shutdowns supply caused by the pandemic – in favor of customers who need high value chips at the lowest price. those used by car manufacturers and banks.

This takes on significance given the representation of the Indian Banks Association (IBA) to the government requesting the intervention of the antitrust panel to address the shortage of chips affecting the issuance of credit and debit cards. However, semiconductor industry executives attribute this to market forces. They say that once the pandemic took hold, some products like laptops and smartphones took precedence over others, triggered primarily by actions taken by consumer segments such as automakers.

This has led OEMs (Original Equipment Manufacturers) in some sectors to free up slots in manufacturing units allocated to automakers to meet demand for other high-value items such as laptops, smartphones , headphones, etc., the demand for which increased when people started working from home.

“Just as we book train tickets in advance and there is a waiting list, you have to book slots to have chips made in advance. If you don’t, you lose your location. Many auto companies canceled their slots (when the pandemic started) assuming they wouldn’t need them,” said Sanjay Gupta, India vice president and general manager at NXP Semiconductors, headquartered is in the Netherlands, at The Indian Express. NXP Semiconductors is one of the three largest suppliers of semiconductors to automotive manufacturers in the world.

“It was because having the slots meant you paid some of the expenses. Running a fab costs millions of dollars a day. Automakers thought the supplies wouldn’t be needed in the first two quarters of 2020 and they freed up those slots. But there was another phenomenon happening – working from home, studying from home, home gym, pretty much everything from home. No one had foreseen this phenomenon. The digitization that was supposed to happen in 5 to 10 years happened literally in a quarter,” said Gupta, adding that once demand for cars returns, it is difficult for automakers to reclaim those slots. . “Automakers barely got their slots back and whatever they could get they got at a higher price.”

Explain

Automakers are ditching slot machines

Automakers and banks say chipmakers prefer sales of high-end chips for laptops and phone companies over the low-end ones they need. However, semiconductor companies say that during the pandemic auto companies, their demand depressed, freed up their “chipmaking” slots given the lockdown – and were only now coming back.

For car manufacturers, this meant huge order books, and even the reduction of certain features for lack of necessary electronic parts and components.

Meanwhile, in 2021, India recorded 14.85 million shipments of personal computing devices such as laptops and desktops, up 44.5% from 2020, data shows. provided by International Data Corporation (IDC). While PC shipments began to slow in 2022, some industries are still being hit by semiconductor shortages.

Along with this is the government’s concerted push towards semiconductor manufacturing. Last week a joint venture between Vedanta Group and Taiwan’s Foxconn announced the establishment of a semiconductor and display manufacturing unit in Gujarat. Proposals have also been received from Singapore-based IGSS Ventures and ISMC, which is led by Abu Dhabi-based Next Orbit Ventures Fund.

Last December, the Union Cabinet approved a Rs 76,000 crore plan to set up a semiconductor and display manufacturing ecosystem. Under this plan, the Center has provided incentive support for companies engaged in silicon semiconductor fabs, display fabs, compound semiconductors, silicon photonics, sensors, semiconductor packaging and semiconductor design.