Semiconductor chip shortage forced firms to curtail production: Economic survey

New Delhi: Several companies from diverse industries have been forced to either shut or curtail production due to the breakdown of supply chains owing to shortage of semiconductors, the Economic Survey said, adding that the government’s Rs76,000 crore push to set up chip manufacturing capabilities across the country would give a boost to electronics production.

“The PLI and other schemes to boost semiconductors will not only help domestic companies to overcome the challenges posed by Covid-19 but also assist them to become globally competitive, especially in chip making,” the survey said.

The Cabinet last month cleared a Rs76,000-crore incentive scheme to set up semiconductor manufacturing capability in the country. Under this scheme, India will set up more than 20 semiconductor design, components manufacturing and display fabrication (fab) units over the next six years. According to a Goldman Sachs report, supply chain disruptions last year in the semiconductor industry had a spillover in over 169 industries.

“The manufacturing of semiconductors requires large amounts of capital and has an average gestation period of 6-9 months. Moreover, it has a fairly long production cycle of about 18-20 weeks. Hence, any recovery from the supply chain disruptions will be a slow and costly affair,” the report said.

The report said microchips and semiconductors account for about 4.7% of value added by the automotive industry. With the delay in supply, the average lead time in the automobile industry in 2021 was around 14 weeks globally.

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