Auto industry seeks Govt's support to set up semiconductor production in India

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26 Aug, 2025 12:21

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Weighed down by the severe shortage in availability of semiconductors that has crippled vehicle production, the automotive industry is seeking government’s support in setting local manufacturing of the critical component.

Speaking at the sixth ACMA Technology Summit & ACMA Awards 2020, Kenichi Ayukawa, president SIAM and managing director, Maruti Suzuki said that the government’s support is needed since investments required for localisation of semiconductor is large and the beneficiaries include companies from the non-auto sectors also.

“SIAM and ACMA have identified specific areas such as engine transmission, electrical, tooling, grade of steel etc that has good scope for localisation. For semiconductor parts government support is required for localisation as it needs huge investments. Auto demand alone is not enough for localisation in electronics. We will surely seek minister’s time to present our plan of action to meet this vision of our honourable Prime Minister,” Ayukawa said.

The average level of localisation in the auto industry is 70 percent. Some companies have hiked the levels to beyond 90 percent too. Nitin Gadkari, minister of road transport and highways added the government is in favour of pushing for higher degree of localisation within the automotive sector. “The government will consider hiking customs duty on parts which are imported,” added Gadkari.

Semiconductors are the chips that control critical areas of the vehicle like airconditioning, airbags, driver information, audio/video entertainment, capturing data with sensors, managing electrical and mechanical activities, navigation, collision detection system.

SUV-specialist Mahindra & Mahindra (M&M) has suffered the most because of the shortage. Since November the Mumbai-based company is struggling to increase production of the Thar SUV because of shortages of semiconductors supplied by parts maker Bosch. M&M has also pushed forward the commercial launch of two refreshed products, XUV500 and Scorpio, because of the shortages. Ford had to keep its Chennai plant shut.

Bosch blamed the shortage of the vital component to growing global demand to make machines that look into safety and hygiene against COVID-19. The company also said the switchover to 5G technology was also responsible for the shortage of microprocessors. Bosch imports components to India before supplying the finished product to its clients.

Computers and servers are the largest consumers of semiconductors followed by the wireless communication industry. Industrial and consumer electronics are the next big user of semiconductors. The automotive sector stood fifth in the ranking, as per a Mckinsey study. Hybrid and electric vehicles make more use of semiconductors than combustion-engine vehicles.

Production of Maruti Suzuki, Hyundai and Tata Motors has not been affected by the shortage of semiconductors, so far.