A surge in demand for cellphones, PCs, televisions and appliances during the pandemic had led to a mismatch between supply and demand for semiconductors, causing automakers to face shortages of the part and forcing automakers to stop supplying them for several months in the past. vehicle production a year.
That situation is now changing. As consumers prioritize their consumer electronics spending amid high inflation, the supply of chips for automakers has improved. Vehicle makers have ramped up production and the industry estimates that deliveries of cars and SUVs from factories in July are the highest ever in a month, at about 350,000 units; the previous peak of 334,000 units was recorded in October 2020. With the chip shortage easing, they also predict sales will hit a new record in fiscal year 2023 with 3.5-3.7 million passenger cars.
Group Chief Financial Officer PB Balaji said the slowdown in the white goods industry contributed to the improvement in chip supply and he did not anticipate major concerns about domestic car production due to the shortage of parts. For its British unit Jaguar Land Rover, the company expects its highest production ever in five quarters in July-September. During the automaker’s post-revenue call, Balaji also said he expected vehicle offerings to improve each following month.
Over the next two months, the stock, which is currently very low, is likely to double. Ahead of major festivals, it aims to bring stock to an “optimum level” of six weeks. Rakesh Sharma, executive director of Bajaj Auto, said in a recent media appeal that the supply situation has improved dramatically since the second half of July.
There is a fair amount of reason to think why the situation will improve with each passing month, said Balaji of Tata Motors. “Chip availability visibility has improved significantly compared to early May and June, with production ramping up in the second quarter. There’s still some firefighting, but it’s nowhere near the scale of the challenge we had even two to three months back.”
SHIPPING SMARTPHONE FALLS
Consumer sector executives said that amid sluggish demand for smartphones, laptops, smart televisions and mid-range devices, companies had cut production by 20-30% since May-June. They expect it to remain that way at least in August.
Kamal Nandi, chief executive of Godrej Appliances, said the turnaround time for chipset availability had gradually decreased for them as well, from its peak of nine months a year ago to about three months now. “Most global economies are reporting a slowdown in electronic sales, so the supply situation has improved dramatically,” he said.
Chipsets are used in all segments of smartphones and laptops whose demand has fallen, while for devices it is mainly used in premium products. In smartphones, according to Counterpoint Research, companies hold 10-week unsold inventory, more than double what is usual. Smartphone shipments fell 5% quarter on quarter in April-June, the research firm said.
Automotive accounts for just 5% of global semiconductor demand, but that’s one of the sectors where demand is still strong. Quarterly results from major global chip manufacturers suggest that demand for consumer electronics chips has declined. But thanks to the automotive and industrial segments, the factories are running at full capacity.
Global chipset vendors such as Samsung, Intel and Qualcomm are also signaling lower demand, especially for entry-level electronics. This can be deduced from the fact that the premium to the maximum selling prices of graphics processing units – called the brain of the slot machine – has fallen by 30-40% in recent months.
US chipmaker Intel’s client computing segment – which focuses on the desktop and notebook segment – declined 25% year-over-year in the April-June quarter as a result of moderation in education, consumer and inventory reductions.
The world’s largest chip maker, Taiwan Semiconductor, said supply was still below its order book through the next half of 2022, with autos and industrialists maintaining capacity even as there was a slowdown in consumer demand. pc and android smartphone segments.