Auto Sector Update - Expert view on chip shortages By Emkay Global
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
https://t.me/InvestmentGuruIndiacom
Download Telegram App before Joining the Channel
Expert view on chip shortages
We hosted a conference call with a semiconductor industry expert who has 23 years of experience working with companies such as NXP Semiconductors India, Novellus Systems and Infineon Technologies.
Here are the key takeaways:
* Longer lead times to affect semiconductor supplies for Q2/Q3FY22: Lead times for automotive chips have increased notably from normal levels of 8-12 weeks to 36-40 weeks currently, mainly due to the recent spike in Covid-19 cases and restrictions in the Asian countries that are part of the supply chain. Lead time is the amount of time taken between ordering a chip and taking delivery.
* Chip shortages are expected to persist in Q2/Q3FY22 and supplies are expected to improve in a staggered manner. Lead times are likely to decrease to 18-20 weeks by Q4FY22 and may come down to normal 8-12 weeks by FY23-end.
* PVs to be more affected than CVs and 2Ws: Semiconductors are used in powertrain, chassis, safety, convenience, advanced driver assistance systems, infotainment, etc. For mass-market PVs, the chip content stands at US$40-50 per vehicle, which is higher in comparison to 2Ws and CVs. Considering higher content, supply issues would be higher in PVs, especially in premium categories.
* Chip content higher in premium segment and EVs: In comparison to mass-market ICEs, the chip content in the premium segment and EVs could be higher by up to 10x.
* New product launches may be delayed: Due to supply issues, the launch timelines of new products may see some delays.
* High prices: Chip prices are increasing due to supply pressures. Generally, prices are revised every three months.
* Larger OEMs to see faster recovery: Chip supplies in India are mostly handled by distributors such as Arrow Electronics, Millennium Semiconductors, etc. Since larger OEMs have better negotiating power with chip distributors, they are likely to see a relatively faster recovery.
* Gestation period for setting up capacities in India: The amount of time required for setting up local capacities in India could be as long as two years.
Our view: Chip shortages may impact production and dispatches in the near term, posing downside risks to FY22 volume estimates. PV production is likely to be more affected in comparison to 2Ws and CVs.
To Read Complete Report & Disclaimer Click Here
For More Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354
Above views are of the author and not of the website kindly read disclaimer
