What are these chips and why are they so important?
Due to the shortfall of these semiconductor chips, smaller than a coin, companies around the world are being affected. These are small transistors, which are made from silicon. With the help of these chips, computers, smartphones, appliances, and other types of electrical devices work. It is also used in vehicles.
According to a BBC report, it is an industry of about $ 500 billion. The global tech economy of about $3 trillion is dependent on the chip itself. Most of the raw material for the semiconductor business comes from Japan and Mexico. It is prepared in other countries including Taiwan, China, and America.
Hyundai Motor Company has been closed for a week. Yes, you heard it right. Due to a chip shortage, Hyundai Motor Company had to suspend its production for a week. Not only Hyundai Motor Company, but the global motor industry itself has also suffered a major setback because of a chip. And almost all motor companies have either had to stop their production or have to reduce the pace of production. Hyundai Motor Company has also not been able to survive the chip crisis and due to a shortage of semiconductors, the company had to shut down for a week.
April Crisis Theory proved to be true For the past several months, it was feared that due to the shortage of semiconductors, the car companies may face a huge crisis in April and the April Crisis has proved to be true when Hyundai Motor Company has to stop its production. Had to shut down for a week, then the production of another famous car company Kia has come down drastically. Hyundai Motor Company on Tuesday announced that the company’s Ulsan plant will remain closed from April 7 to April 14 due to supply issues.
How big is this announcement of Tata and what will be its impact?
Tata Motors has said that its wholesale volume may decline by 50 percent in the second quarter. It is a matter of concern that this problem may continue till the end of this year as well. The company has said that the problem of chip shortage is not under the control of the company and it will also affect the cash outflow.
During the first quarter, the company had a loss of 30,000 units due to this reason. Now sales are going to be affected in the second quarter as well.
What worries Tata investors?
Except for Jaguar Land Rover, Tata Motors has not faced the problem of chip shorts on its production so far. But the company is not going to get any revenue from the passenger vehicle segment. In this comparison, Jaguar Land Rover has done well in other markets including America, UK, Europe, China. About 80 percent of Tata Motors’ revenue comes from Jaguar Land Rover.
Apart from this, Jaguar Land Rover has recently launched Land Rover Defender and Jaguar E-Peace. Jaguar Land Rover currently has 110,000 orders globally. This is the highest order ever in the company’s history. It is believed that this is a three-month sales cover. But now the waiting period is going to be affected a lot due to chip shortage.
What is the way forward?
Not only Jaguar Land Rover but its rivals Mercedes-Benz, Audi, and BMW have also been affected due to chip shorts in the last three months. All these companies have also suffered losses at the production level. On July 2 itself, BMW had said that the company may suffer a loss of 30,000 units so far this year due to chip shortage and it may continue in the future.
Recently, Jaguar Land Rover has said that the new consignment of semiconductors with the company will be normalized only after 12 to 18 months. Bosch, the company that supplies chips to automobile companies globally, has also warned that it may have to deal with chip shortages only for the entire financial year.