Innovative solutions needed to cope with chip crisis: ACMA chief

Sunjay Kapur: “The chip shortage will have an impact across industries and not just automotive which buys only seven percent of the total output.”

Sunjay Kapur, the new President of the Automotive Component Manufacturers Association of India (ACMA), drives home the point that the semiconductor crisis extends beyond the auto sector alone. 

“The chip shortage will have an impact across industries and not just automotive which buys only seven percent of the total output,” he told Autocar Professional.

From the auto sector’s point of view, output has been badly hit with Maruti Suzuki India announcing a 60 percent cut in September and Mahindra & Mahindra looking at 25 percent reduced output. This is happening at a time when demand for passenger vehicles is at an all-time high with people opting for personal mobility instead of public transport. 

The chip shortage has now led to long waiting periods ranging from two to eight months according to the Federation of Automobile Dealers Associations of India (FADA). “While there is on-ground demand according to FADA, the supply is not (keeping pace) which can be very frustrating to the end-consumer,” said Kapur who is also Chairman of Sona Comstar.

With more electronics in cars driven by high-end infotainment systems and active safety features, companies are buying semiconductors at inflated prices. “We do not really have leverage when it comes to chips. We are a very small buyer which mostly sources from chip distributors and not manufacturers,” said Kapur.

For now, OEMs have little choice but to alter their variant mix or cut down on low-value features and get on with the business. “We have to overcome the situation by finding innovative solutions,” said Kapur. According to him, the shortage is here to stay at least for the next few months and coupled with the fact that logistics costs and freight charges are high, “we will need to find solutions to come out of this”.

With no domestic foundries leading to heavy dependence on Taiwan, China, South Korea and Japan for supplies, India finds itself in a fragile situation for availability of chips. “I hope that more people begin manufacturing chips. Large business houses, whether in India or overseas, can invest in new capacities though it will take time to start production,” added Kapur.

From the ACMA chief’s point of view, India must look at creating capacity for its own internal purposes. Any company that has the ability to put down that kind of money to build a chip factory “must go ahead and do it”.