Supply issues will continue to plague manufacturers in the January-March quarter
Supply problems will continue to haunt manufacturers in the January-March quarter | Photo credit: PTI
Recent restrictions imposed due to the increase in Covid-19 cases in China and Hong Kong have worsened supply chain conditions which continue to be under pressure, according to senior executives at several electronics and auto companies .
These executives said early indications from suppliers and logistics companies suggest more bottlenecks in the supply of key components in the January-March quarter. These disruptions could increase component supply and transportation costs. Manufacturers are concerned about developments and some have already stepped up their sourcing efforts to tackle any potential disruption. The situation is worrying as several auto and electronics manufacturers have been forced to cut production due to a persistent shortage of semiconductors.
Bosch Siemens India chief executive Neeraj Bahl told Economic Times the company headquarters had warned of “serious disruption” in supplies, escalating costs and the impact on the impact on the economy. supply chain in the January-March quarter – issues that are expected to continue into the next quarter as well.
“In fact, the impact could also be felt in the following quarter,” he added.
The chairman of the Dixon Technologies subcontractor, Sunil Vachani, also anticipates an impact on the supply chain but hopes it will be limited given that the peak of the Omicron wave has been shorter in South Africa.
“The good news is that the coming months are not the peak period for sales and therefore manufacturing will not run at full capacity,” he told the business daily.
Analysis firm IHS Market estimates a production shortfall of 50,000 light vehicles in India in the March quarter due to the worsening supply situation. IHS Markit associate director Gaurav Vangaal noted that the increase in Omicron cases around the world, including in China, could further disrupt the global supply chain. He expects a balanced semiconductor supply by Q1 2022, but the lead time will be 26 weeks or more.
“Longer firm order windows will not guarantee that the supply chain can meet quantities or schedules,” he added.
Supply side constraints have resulted in a production shortfall of half a million light vehicles in 2021, IHS Markit said.
Global electronics manufacturers such as Samsung and Micron Technology have said their production facilities in China are operating at much lower levels due to lockdown restrictions.