InvestorQ : What is the microchip shortage that every company appears to be complaining about in India?
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What is the microchip shortage that every company appears to be complaining about in India?

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Rashi Mehra answered.
2 months ago
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The microchip shortage is a big problem not only for India but across the world. Recently, due to the shortage of microchips, Tata Motors, Mahindra & Mahindra and Maruti have decided to cut production by 25-30% during the peak festive season. If you see, the latest decision by Reliance Jio to put off the launch of its low cost smart phone, JioPhone Next, is also driven by the shortage of microchips. Here is why there is a shortage.

Microchips shortage in the last one year has become pronounced due to demand and supply factors. The pandemic led to a sharp spike in demand for laptops, PCs and smart phones as people needed high bandwidth equipment to connect to clients and classes via bandwidth intensive lines. This spiked demand for microchips. There was a surge in spending on smart cars, smart white goods, smart televisions and all are chip intensive.

The bigger problem was that supply could not keep pace. Manufacturing microchips is high technology task and supply cannot be increased at short notice. The world’s biggest chipmakers like TSMC of Taiwan, NVIDIA and Qualcomm have order books full and new capacity will take 2-3 years. That forced a large number of companies to either shut factories or reduce output drastically to match with inventory.

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