Economic Highlight
New Delhi,
25October 2021
Chip Shortage
REVIVE HARDWARE SECTOR
By Shivaji Sarkar
The world is anodd place.
The way to global recovery sometimes is disrupted by an invisible virus and as
it tries to come out of it by a small computer chip. This is thawing both the Indian
and global industry. The sudden shortage of semi-conductor due to production
stress shifting has put the world giants on a tricky slowdown.
A whole array of
products – cars, washing machines, wheel chairs or medical and diagnostic
instruments depend on semi-conductors. The shortage hits even the disabled-using
a semi-conductor controlled wheel chair. The disruption is said to continue for
a year.
India is no exception,
starting from cars and to the medical and personal computer sector. It is hitting
an economy trying to struggle back in a post-pandemic situation. It impacts car
production already dislocated due to campaign to junk fine working ten-year-old
cars or even life saving medical products.
Globally many
products are in short supply. The chips that are in short supply perform
various functions in modern products, and these are often more than one in a
single device. Many electric and electronic hardware firms despite having
orders are unable to complete the production cycle.
The automobile
sector accounts for about 10 per cent of the overall demand,
with the rest coming from the electronic appliances and gadget industry, such
as mobile phones and laptops, among others. And who is not suffering from
Jaguar to Hyundai, Ford, Maruti , gaming industry and entertainmentand an array
of others. Many of these industries are
on a halt. Even the smartphone industry is hit and can lead large groups such
as Apple to a crisis.
It is
difficult to fathom the losses. Production is being delayed, inventories and
debt burden at factories are growing. This may lead to not only delay but the
consequent higher interest repayments can cause sharp price rise in a world
pestered by severe inflation. Banks are also hit and may head for another Non
Performing Assets (NPA) regime.
The chip
production was hit hard during the pandemic as major industries remained closed
and the chip makers looking for an alternative got into different areas, away
from the core buyers - cars, airplanes and other high-end
aerospace manufacturers, which shut down operations because of the pandemic.
This had a ripple effect through the supply chain to semiconductor
manufacturers, who reassigned production to the consumer electronics and
computing industries, which had an upsurge in demand.
The rest was acerbated by the 5G technology dependent
highly on several kinds of chips. Technology changes always may not be
advancement. These can cause disruption too. This is what is happening in a
world that is depending on only one kind of technology, which is either a
control mechanism or useful in secondary system.
The technological monoculture has become a severe
problem. The source materials are also not that immense that it can continue
supply forever. The alternatives are not easy to find. Never in the past technology
has been so dependent on one aspect. The older technology had room for creating
easy alternatives, the new software and chip-based technologies get into
glitches easily. It is time for the world to rethink for induction of
multi-faceted technology options. The world now has less option for jugaad that
used to come out with citizen initiatives.
Since
there is lack of such avenues,getting out of the quagmire in an intellectual
property controlled regime is becoming difficult. The lack of the chip is
hitting the critical life-support systems, including those used in the ICU. The
prices of ventilators, imaging machines, glucose, ECG, blood pressure monitors
and pacemakers are rising.
The chips
for the Indian medical technology makers are sourced from Indian vendors. But
they import it from China, Taiwan and the United States. In the race for
software driven IT industry, no one apparently focused on setting up of chip
fabrication unit for decades in the country. The experts had always expressed
concern over the rise of a secondary industry and taking the prime space in
economy.
It is not
just the consumer but an array of industry and electronics segments that are
hit. The crisis of the life-saving industry has already led to shortage of
patient monitors, ECGs and many other simple devices. But this was not easy to
believe even a short while ago.
India had
a computer hardware sector in 1990s. It
had also a semi-expertoperated by self-trained parallel market. It was called
the Nehru Place or Ghaffar Market (in the Capital) technology. These were
ignored and allowed to die as imports appeared to be at less cost. This apart
IPR type rules that has caused immense problems for India-like countries, were
not contested with the vigour it needed. The industry is now blaming the
government. It earlier did not approach the government and now it is clamouring
for having an Indian atmanirbhar chip production. It may be a good
suggestion, however, it takes decades to set up such facility.
As of now,
be it the car, medical, security and many other critical areas, the chip
shortage has added to prices manifold. It has also led to production losses.
The Society of Indian Automobile Manufacturers(SIAM), car makers association,
notes that the cumulative sales from April to August 2021, the passenger
vehicle segment is still below the level of 2016-17, the two-wheeler segment is
lower than the level of 2011-12, and the three-wheeler segment is behind by
many years.
Sales of
used cars may have gone up many times but for the silly bureaucratic and National
Green Tribunal (NGT) initiated moves to scrap the cars. More the cars, more
people remain employed. Similarly, if a hardware industry is propped up, IPR
protection is given, the country would do better. Unless the silly annihilating
scrapping system is reversed, India’s supposed middle class economy is headed
for collapse.
India is
preparing for a digital boom starting with education. This may not be easy as
even the personal computer system is hit by the chip scarcity. Its prices and
cost per student is rising. It is also to hit the small and large businesses.
The
Narendra Modi government has an open mind. It must initiate a process on
war-footing to revive the hardware sector and keep prices of electronic devices
under check, contest the annihilating IPR rules and help the country usher in a
regime, where all breathe freely, act together and lead India to a prime global
position.---INFA
(Copyright, India News And
Feature Alliance)
|