During the onslaught of the pandemic, the tech industries suffered through many difficulties and even when the pandemic is gradually subsiding, the world is suffering through challenges like the global supply chain disruption with the chip shortages. But that’s not the only problem as most of the companies are now facing delays due to vessel shortages and diversion of ship routes. This has led to a 7 to 8 times surge in freight prices compared to the pre-Covid levels.
According to Saurabh Gupta, the chief financial officer at Dixon Technologies said in an interview that 5% to 10% demand for semiconductors is being impacted for his organization.
“It may take 2 to 3 quarters to normalize to previous levels. then it will have an impact not only on the demand in the industry but also on the margins, but still, I am hopeful that the shortage will normalize within 2 to 3 quarters.”
the impact of the semiconductor shortage made severe damage to the electronics, auto industry in a big way as there are only 5 countries: China, Taiwan, Japan, South Korea, and the EU and the US, who are major suppliers of the chip. These countries are facing heavy demand and supply mismatch.
Work from home and online education has raised the demand for electronics products and semiconductors which manufacturers did not anticipate. However, with the global chip shortage shipping crisis has emerged with uneven economic recoveries. And with the onset of Covid, freight costs have shot up to 300% as per news reports.
The chief financial officer further said that:
Prices for products have gone up due to an increase in commodity cost, including semiconductors which have been escalating since November 2020, and impacts our ODM business, which contributes 20% to the company revenues. Saurabh Gupta, CFO, Dixon Technologies India
Even the exports of India are lacking behind as they are facing delays of more than a month in their shipments. This has been a big challenge on the liquidity side for many businesses.
“Demand during this festive season looks good and we have an extremely healthy order book across all verticals. We have geared up our production but definitely, there are supply-side constraints.”
India has further released its schemes for self-reliance like production linked incentive schemes are being launched for the auto industry, AC and LED lights, telecom, and so on. However, it is also important to look at the manufacturing ecosystem in the country to ensure that the supply chain comes into India over some time.
“Setting up a new unit or expanding manufacturing ecosystem of semiconductors requires large investment and timelines. It will take a couple of quarters for the supply chain to normalize and normalcy to return.”