Semiconductor shortage may choke laptop supply ahead of new academic session

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.

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.