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Semiconductor shortage may choke laptop supply ahead of new academic session

Laptops could be in short supply in India because of the scarcity of semiconductor chips made in China. The shortage comes during the peak-demand period of March-June, which accounts for 40 percent of sales in India

April 26, 2021 / 03:02 PM IST
Laptop_work

Laptop_work

If you are planning to buy a new laptop or upgrade the old one ahead of the new academic session, be prepared for limited availability.

The extended global shortage of semiconductors is now impacting the availability of the electronic chips used in laptops, which is delaying the dispatch of finished products, industry sources told Moneycontrol.

"The shortage of chips is because electronics companies in China have bought the bulk of the chips manufactured locally. This was to meet the demands of 'revenge buying' in China," said the president-South Asia of a global semiconductor manufacturer. Revenge buying refers to aggressive buying of non-essential items after a period of restrictions such as a lockdown.

He said it would take time until July 2021 for the situation to normalise.

The March-June period accounts for 40 percent of the annual sales of laptops while the rest of the sales is split between festive sales around the year.

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This is not a phenomenon specific to India but is a global shortage. But unlike other markets where product sales peak during Christmas and New Year, India sees high demand for laptops during the beginning of the new academic session in high schools and colleges in March, April, May, and June.

With millions of employees working from home and educational institutions conducting virtual classes, the global demand for various gadgets such as smartphones, computers, and high-resolution screens has gone up significantly as people bought new devices to meet professional or academic needs. As a result, demand for key components rose far above the supply.

Data from electronics ministry showed that laptops and tablets worth about Rs 34,000 crore are purchased in India every year. In 2019-20, laptops worth $4.21 billion and tablets worth $0.41 billion, respectively, were imported.

Of this, about 80-82 percent are imported from countries such as China, Taiwan, Singapore, Malaysia and the United States. The ones made in India have the key component, chips, being imported from China and Taiwan.

The domestic laptop market is dominated by brands like HP, Dell, Lenovo, Acer, and Asus.

In February 2021, the Indian government had approved the Production Linked Incentive (PLI) Scheme for IT Hardware. Here, the target segments include laptops, tablets, all-in-one PCs and servers. While semiconductor chips have not been mentioned in this scheme, the electronics ministry is said to have nudged electronics makers to make these components in India.

"Product are at 65 percent capacity and selling fast. Students and young professionals may see a longer wait time. We are in talks with the semiconductor makers in China to address this gap and increase production," said the vice president-India at a large laptop manufacturing brand.

What are chips critical to laptops?

Semiconductors are tiny chips that control the critical functions of an electronic device. Mostly made from Silicon, they control the basic functions of products such as smartphones.

For example, when you search for a product on your computer or try to access your email on the laptop, it is this semiconductor chip that implements these functions and provides accurate solutions. These chips are the core of any device and hence a shortage would hit production.

The manufacturing process for such devices requires a specialised facility called semiconductor fabs (semiconductor fabrication plants). Even a tiny speck of dust that is not visible to the naked eye can hamper the chip’s efficiency. Hence, it takes several years of experience and completely dust-free factories to produce these chips.

The Ministry of Electronics and Information Technology (MeitY) has already worked out a Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS). Here, it is proposed to offer financial incentives of 25 percent of capital expenditure for the manufacturing of goods that constitute the supply chain of an electronic product.
M Saraswathy is a business journalist with 10 years of reporting experience. Based in Mumbai, she covers consumer durables, insurance, education and human resources beat for Moneycontrol.
first published: Apr 26, 2021 03:02 pm

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