Scarcity of IC chips – How India can tackle the growing demand?
SAE India conference on auto electronics 2021
One of the panel discussions inSAE India’s “Auto Electronics 2021” virtual conference held on April 30th was on the topic “Scarcity of IC chips - How India can tackle the growing demand?” Dr Shankar Venugopal, VP Mahindra & Mahindra moderated the panel. The other panellists were Prof RK Amit (IIT Madras), Dr Anuradda Ganesh (Cummins India), Kaushik Madhavan (Frost & Sullivan), S Ramachandran (Infosys) and Dr Karthik Sundarraj (Hexagon).
The discussion started with setting the context on why there is such an acute shortage of chips globally. It did not happen overnight. It started with the sanction imposed by the U.S.A. on China for semiconductors, during President Trump’s era. The lockdown due to the COVID-19 pandemic in early 2020 made chip makers shift focus to other profitable sectors like consumer electronics, which witnessed a huge demand, with many working from home. When the auto industry quickly bounced back during the latter part of the year, the chip makers were not ready to resume supply. Untoward incidents like a fire accident in Renesas factory in Japan and the Texas snowstorm caused further damage in 2021.
Consumer preferences and regulatory compliance have increased the usage of chips in cars – for infotainment, emission control, safety, crashworthiness, and vehicle health monitoring. Cars are becoming smart mobile devices enabled by connectivity. With more than a trillion digital transactions in India in 2020, cars are set to become a mode of payment. In such a situation, the lack of readiness in terms of skill sets, technology, research, infrastructure and a proactive approach for auto chips have hurt India. Afterall, it is not a tortoise vs a hare race anymore. If chip manufacturing is considered as the hare, the automotive industry and its demands are galloping like a stag. During the last tsunami in Japan, vehicle makers realized that they could not go beyond 2 to 3 levels of their suppliers for tracing the origin of their parts. Such a lack of transparency along the Indian supplier ecosystem is also a reason for the shortage.
If electric vehicles are the way forward for the automotive industry, the types of chips that would be required would definitely come down. As such, chip shortage may not be a huge challenge in the medium term.
According to several experts, half the cost of making an internal combustion engine vehicle would go towards electronic components by 2030. What can Indian auto makers do to address this scarcity? Vertical integration, which was popular in the traditional auto industry could be one way. Local consortiums can be formed to manufacture critical components and chips, with continuous innovation and sector-wise collaboration. The consortium should be a tripartite collaboration between the industry, the Government and the academia. Car makers need co-creation of new products along with chip makers, starting from the early design stage and all the way to development, manufacture, testing and service. We can standardize and modularize the vehicle platforms wherever possible and scale up the level of operations.
The panel discussion concluded with a big, audacious goal from each participant. If electric vehicles are the way forward for the automotive industry, the types of chips that would be required would definitely come down. As such, chip shortage may not be a huge challenge in the medium term. Elon Musk brought the three components required for an automobile ecosystem together for Tesla to be successful. In the traditional internal combustion engine driven vehicle market, oil refineries, fuel stations and the vehicle are the three components for generation, delivery and consumption of energy. Similarly for electric cars, India should think of factories, charging stations and electric cars in a non-linear fashion to be successful. We are used to linear thinking, extrapolating what is available today.
The goal of car manufacturing should be to make vehicles faster, cheaper, better and also sustainable. The gap between classroom education and industry requirements should be plugged. We need to progress from linear thinking to exponential thinking. If the software industry is our strength, we should leverage it for accelerated product development. We need a systems-thinking approach for the automotive supply chain and model it to foresee the future. Our supply chains need to become resilient to shocks, with redundancy and flexibility built in, and the final product assembly postponed as much as possible.
India can become the global hub for sustainable mobility if we bring in all these ideas together as a self-reliant and resilient strategy for Aatma Nirbhar Bharat.