According to recent research by Nomura, the development of the delta variant, combined with poor vaccination rates in several ASEAN nations and China's zero-tolerance Covid strategy, has caused governments to impose restrictions and shut down factories and ports. Likewise, Nomura states that input shortages and low inventories might result in production cuts, shipment delays around September this year.

This adds more woe to the chip or semiconductor inventories which are already facing a low run across many sectors in many countries. Meaning that the shortage of raw materials, port congestion, and container shortages, lead times, for the duration between ordering a chip and receiving it, have increased. Particularly in countries that are part of manufacturing supply chains, such as Vietnam, South Korea, and China in August.

The manufacturing PMI component of the suppliers' delivery time index fell in eight of nine Asian economies in August, to an average of 41.3 from 42.0 in July, both below the 50 mark barrier, according to statistics.

In fact, Vietnam's IHS Markit PMI fell to 40.2 in August from 45.1 in July, marking the country's third straight month of contraction and lowest rating since April 2020. Thailand's PMI, on the other hand, fell to 48.3 from 48.7, marking the seventh contraction in the last eight months, while the Philippines' fell to 46.4 from 50.4, marking the lowest reading since May 2020.

Malaysia and Indonesia saw some relief in July, with PMI readings rising to 43.4 from 40.1 and 43.7 from 40.1, respectively, albeit both remain below the 50-point threshold that distinguishes contraction from expansion, according to IHS Markit statistics.

“In August, manufacturing PMIs in Indonesia, Vietnam, Thailand, the Philippines, and Malaysia all remained in negative territory, reflecting the disruption caused by lockouts that forced facilities to halt or delay production”, adds Sonal Varma, Chief Economist for India, and Asian ex-Japan, Nomura.

According to a recent report, the worldwide semiconductor sector is worth $439 billion dollars. Another report by The Ken, Taiwan is the epicenter of the semiconductor industry, with 63 percent of foundries located there, followed by South Korea at 18 percent and China at six percent, with the remaining 13 percent foundries located in different nations across the world.

According to an August 30 letter from Emkay Global, the lead time for automotive chips has gone from the usual levels of 8–12 weeks to 36–40 weeks today.

According to the research, this is due to an increase in Covid-19 instances as well as restrictions in Asian nations that are part of the supply chain. Maruti Suzuki, for example, currently estimates a 60 percent decline in overall vehicle production in September across its Haryana and Gujarat plants due to a chip shortage.

However, Emkay Global says that the lead time for automotive chips has gone from the usual levels of 8–12 weeks to 36–40 weeks. It states that it is due to an increase in COVID-19 instances as well as restrictions in Asian nations that are part of the supply chain. Maruti Suzuki, for example, currently estimates a 60 percent decline in overall vehicle production in September across its Haryana and Gujarat plants due to a chip shortage.

“In Q2/Q3-FY22, chip shortages are projected to remain, with supplies improving in a phased manner. Lead times are projected to fall to 18-20 weeks by Q4-FY22 and may come down to usual 8-12 weeks by FY23-end”, adds Emkay Global's Raghunandhan N L, Mumuksh Mandlesha, and Bhargava Perni.

“In reality, the manufacturing PMIs' output and export orders components both fell in August. Since Asia is home to the world's global manufacturing powerhouses, greater downstream product costs for Western consumer markets may be in store if supply limitations do not ease in the next month or two”, adds Sonal Varma.