As chip shortage bites, companies cut down features to reduce delay

Automakers, for instance, are delivering new cars with just one key and a promise to provide the next one at a later date. Others are delivering cars with smaller display screens or without music systems. Despite these adjustments, waiting periods on several models are at a record high.

Both Hyundai and Tata Motors are delivering cars with one key, instead of two, and are promising to deliver the second in another six months, it is learnt. Tata has also launched a version of its hatchback, Tiago, without the music system. Skoda, meanwhile, has reduced the size of display screens on Kushaq and Slavia to 8 inches from the earlier 10 inches.

The banking and telecommunications sectors, too, are being forced to adapt.

Bank branches are telling customers to expect delays in issuance of cards, sources said. The Cellular Operators Association of India has proposed that the Department of Telecommunications ask mobile manufacturers to provide slots for eSIMS even on cheaper (Rs 10,000-plus) phones. Due to the chip shortage, the cost of SIM cards has gone up five times. The proposed move has been opposed by the Indian Cellular Electronics Association, as it would make these phones expensive.

A chip or semiconductor is a crucial component that powers electronic items and is used extensively by companies that make smartphones, computers/laptops, automobiles and fast-moving consumer goods, etc. The supply of these chips took a hit during the lockdowns across the globe, forcing chip-making facilities to shut down.

Automobile companies have also tinkered with their production pattern by manufacturing some models of cars with fewer features, requiring fewer chips.

“We have been trying to make adjustments in production across different variants and models. This is possible for Maruti Suzuki because we have a large number of models. You would have seen we are producing more Alto, Spresso, wagon R, instead of Ertiga, Brezza and Swift. But the negative side of this is that it makes the waiting period of some variants very long,” Shashank Srivastava, Senior Executive Officer, Marketing & Sales, told The Indian Express.

Tata Motors and Hyundai Motor, in their email responses to queries sent by The Indian Express, said their production pattern is flexible enough to adjust to demand and supply and that they are also developing alternative architecture for the affected parts.

According to J.P. Morgan Research, more chips will become available in the second half of 2022 as normalcy returns. This could mean there will be enough supply to meet the demand during the festive season that starts in India next month.

The available chips, however, may not be sufficient to satisfy all demand. Some projections say the situation will not ease before 2024.

Maruti says it is difficult to predict the course of chip shortage.“It is difficult to predict when the semiconductor shortage crisis will be completely over, as it is a complex global supply chain issue affecting all OEMs,” Srivastava said.

Newsletter | Click to get the day’s best explainers in your inbox

Hyundai Motor, however, is optimistic. “We are carefully optimistic and believe with improvement in the chip supplies we will be able to clear some of the backlog during the festive period,” the company said.

India, in December 2021, had announced incentives of up to Rs 2.3 lakh crore to attract firms engaged in semiconductor manufacturing, testing, packaging and design.

On July 20, Rajeev Chandrasekhar, Union Minister of State for Electronics and Information Technology, told Parliament that his ministry has received 23 applications for the semiconductor profit-linked incentive scheme.