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Global Chip Shortage is Chipping in On India's Automobile Sector


Due to semiconductor or chip shortage, September this year for India might be in for a bumpy ride, and companies such as Mahindra & Mahindra (M&M) are said to go on 'No Production Days' for seven days. Chip shortage is reigning terror across most sectors on the globe, with the automobile industry taking a major dip among others in India. For the size these chips come in, they do be pressing the panic button on every sector to the point of resulting in production cuts and shipment delays. Without doubt, they have digitally shaped the world to what it is today, yet its shortage is making the entire world rumble.

Since they play a significant part catering to control and memory functions in products from computers, smartphones, data centers, electric vehicles (EV), aircrafts, supercomputers to automobiles and others in the electronic realm. In fact, the automobile industry appears to have banked on it the most in recent times with new modifications like Bluetooth connectivity, driver assist, navigation, and hybrid-electric systems. That gives more reason why the automobile industry in the country seems to have a hard time the most out of other sectors.

However, the automobile sector appears to have been in demand a lot regarding its products, therefore, the sector had to heavily count on chips for its enhancements. As a result, there was immense pressure on the chipmakers to supply as much chips as they could to quench the thirst of the automobile sector, to the point that there’s a huge chip shortage. Other sectors are also to blame for the shortage, but the automobile sector is the one that relies on chipmakers the most and is now facing the consequences.

M&M to Go On 'No Production Days'
Mahindra & Mahindra (M&M) decided to go on ‘No Production Days' of around seven days this month as its automotive sector continues to face the brunt of semiconductor supply constraints, which have been aggravated by COVID-19 lockdowns in some parts of the world. The drop in production levels will have an impact on the company's revenue and profitability. On the other hand, stated that the company is implementing various cost-cutting initiatives to mitigate the impact.

However, the 'no production days,' according to M&M, will have no impact on the company's tractor and 3-wheeler divisions. Furthermore, the aforesaid incident will have no major influence on the XUV7OO manufacturing ramp-up and launch plans, and the start date for bookings will be revealed soon. Even as demand recovers from the second wave of the pandemic, a global shortage of semiconductor chips is affecting automobile production. M&M's stock is currently selling at 762 per share on the BSE, down about one percent.

Intel is in negotiations with companies that make automotive chips, to bring those operations to its facilities. If the initiative is successful, Intel CEO Pat Gelsinger said the company may start producing chips in six to nine months

M&M's news comes a day after Maruti Suzuki announced that due to a lack of semiconductors, output at its plants in Haryana and Gujarat may be hampered next month. According to Maruti Suzuki, total production volume in Haryana and Gujarat might be about 40 percent of typical output.

Maruti Suzuki's Haryana and Gujarat Plants Expect Massive Hit
Maruti Suzuki India Ltd, the country's largest carmaker, indicated that due to semiconductor shortages, production at its plants in the states of Haryana and Gujarat may be impacted in September. Despite the fact that the situation is fluid, it is presently projected that overall vehicle production volume across both locations are said to be about 40 percent of usual. The company's annual production capacity at its Haryana operations in Gurgaon and Manesar is roughly 15 lakh units.

Although, Indian automakers released their August sales figures, with the majority of them showing a year-over-year improvement. However, Mahindra's passenger car sales decreased 24 percent month over month, Maruti's sales fell 22.8 percent, and Tata Motors Ltd sales declined 7.2 percent.

JLR Goes into Stress
Due to the chip scarcity, Jaguar Land Rover, which is owned by Tata Motors, is also experiencing production issues. The British brand expects semiconductor supply shortages to be worse in the July-September quarter than in the first, resulting in wholesale volumes that are around 50% lower than expected.

JLR now has approximately 1,10,000 retail orders pending around the world.

S S Kim, the MD and CEO of Hyundai Motor India, anticipated that the automaker is experiencing challenges due to chip shortages. "Our manufacturing team is in charge of the problem, and they're working closely with our suppliers. Our production is quite adaptable, so we can adjust to the situation...we have been impacted, but not significantly”.

A prolonged global chip shortage has caught Ford Motor Co, Honda Motor Co Ltd, General Motors Co, and Volkswagen AG off guard, causing several to stop or limit production.

There's Still Hope
Intel is in negotiations with companies that make automotive chips, to bring those operations to its facilities. If the initiative is successful, Intel CEO Pat Gelsinger said the company may start producing chips in six to nine months. Over the next decade, the world's largest chip manufacturer wants to double its share of high-end semiconductor production to 20 percent.

Intel introduced its new IDM 2.0 approach in the hopes of significantly increasing the chipmaker's manufacturing capacity and substantially changing the way it creates chips in general. As a result, the world-renowned chipmaker has pioneered new intrinsic process and packaging technology roadmaps. Along the way, these include a spate of basic advancements that are expected to provide its products more power beyond 2025.

The advancements are critical in improving the power consumption of its processors, with a focus on improving battery life while increasing performance.

The chipmaker, on the other hand, has other ambitions than fending off competitors, as most competitors do in most circumstances. It intends to embrace Qualcomm in order to recapture its silicon monarchy as a means of reclaiming its leadership. When that is accomplished, the chipmaker intends to open its plants to the production of chips for other companies.

In addition, the chipmaker stated that it has negotiated agreements to manufacture chips for Qualcomm and Amazon at their respective facilities. However, there is a catch; the chipmaker will, of course, manufacture chips for its competitors. But instead of the x86 architecture utilized in its processors, including as the 11th Gen Core CPUs, these chips will be based on ARM architectures.

Nonetheless, Qualcomm and Amazon are the company's initial customers for its new Foundry Services division. The chipmaker's 20A process technology, particularly with its freshly built RibbonFET, will be used to create Snapdragon chipsets by the former.

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