The global semiconductor landscape has begun to show signs of relaxation, breathing life back into India’s passenger vehicle (PV) production. A Crisil Ratings report illustrates an uplifting scenario, with a 6.25% year-on-year growth in PV production, marking an ascension to 2,418,601 units in the first half of FY24.
A semiconductor, or chip, is a crucial component, particularly in the realm of passenger vehicles, where technological advancements necessitate an increasing number of chips. Each passenger vehicle hosts an impressive array of around 1,500 chips, a number that swells substantially in the realm of electric vehicles. An easing of the chip shortage saga has translated to 85-90% availability, a sign of reinvigoration, according to Anuj Sethi, Senior Director, Crisil Ratings.
Navigating through the challenges, the industry faces an overwhelming backlog, close to 700,000 new orders, with production facilities bustling at near-optimal capacities. These capacities are navigating the high seas of demand, a rebound that has taken the industry by a pleasant surprise.
The semiconductor saga has roots entangled in a diverse geographical tapestry. Western territories exhibit dominance in areas such as architecture and design, while the eastern echelons, notably Taiwan and South Korea, emerge as manufacturing strongholds.
The pandemic’s unforeseen turbulence led to a recalibration of priorities, with manufacturers caught in a semiconductor conundrum due to unforeseen fluctuations in automobile demand. A pivot towards sectors such as computer and communication equipment became evident, fueled by an uptick in remote activities ranging from work to healthcare services.
Moving forward, a more harmonized balance in demand-supply dynamics is anticipated by FY26, propelled by fresh capacity additions in the semiconductor industry. The subtle shift in focus towards the automobile sector, following a slowdown in demand for computers and mobile phones, has also ushered in an optimistic outlook for passenger vehicle production in India, steering it gradually towards pre-pandemic vibrancy.
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