Saurabh Gupta, CFO, Dixon Applied sciences, in an interview with ETCFO, mentioned 5-10% of semiconductor demand is impacted for his group.
“It could take 2 to three quarters to return to earlier ranges,” mentioned the CFO. If the scarcity continues past the anticipated interval, “then this can affect not solely on demand within the trade but in addition on margins, however I nonetheless hope that the scarcity will normalize by 2 to three quarters, ”Gupta mentioned. .
The semiconductor scarcity has a significant affect on the electronics and automotive trade as there are solely 5 international locations: China, Taiwan, Japan, South Korea and the EU and the USA, that are the primary suppliers of the chip. These international locations face excessive demand and a provide mismatch. Many international locations have nonetheless closed their borders as a consequence of pandemic restrictions.
Working from house and on-line schooling have elevated demand for electronics and semiconductors that producers didn’t anticipate.
With the worldwide scarcity of chips, there’s a transport disaster with uneven financial recoveries. And with the onset of Covid, transportation prices have soared to 300% in response to experiences.
In accordance with Gupta, “the price of sea and air freight has elevated 7 to eight instances greater than pre-Covid ranges, leading to a rise within the general price of freight,” he mentioned.
It is a troublesome business price for companies. Dixon Applied sciences was capable of move a lot of the value improve and sustain with the stress on margins via a mix of calibrated value will increase, stock planning and worth engineering, in response to Gupta.
Product costs have elevated because of the improve in the price of commodities, together with semiconductors, which have been growing since November 2020, and are impacting our ODM enterprise, which contributes 20% of the corporate’s income. ‘enterprise.Saurabh Gupta, CFO, Dixon Applied sciences India
Indian exporters as an entire face delays of greater than a month of their shipments. This has been a giant liquidity problem for a lot of corporations. The nervousness of the vacation season
Whereas the federal government is in talks with exporters to assist them address a world container scarcity, the electronics and auto trade is feeling the stress.
Nonetheless, Gupta shared that they’re in a greater place. In shopper electronics and lighting, Dixon Applied sciences has a lot of accrued inventories of vital parts, together with semiconductors. In addition they have provides coated for the upcoming vacation season, he mentioned.
“Demand this vacation season appears good and we’ve got a particularly wholesome order e book throughout all sectors. We now have tailored our manufacturing, however there are definitely constraints on the provision facet, ”he mentioned.
What’s the answer – on the nationwide degree?
The Federation of Indian Export Organizations has requested the federal government for a freight assist program till the top of the fiscal 12 months, when freight charges are anticipated to normalize.
Nonetheless, as applications for Autonomous India corresponding to manufacturing associated incentive applications are launched for automotive trade, AC and LED lamps, telecommunications, and many others., it is usually important to look at the nation’s manufacturing ecosystem to make sure the provision chain arrives in India over a time frame.
“Establishing a brand new unit or increasing the semiconductor manufacturing ecosystem requires vital funding and time. It is going to take a number of quarters for the provision chain to normalize and return to regular, ”Gupta mentioned.