The recent restrictions imposed due to the increase of Covid-19 cases in China and Hong Kong have worsened the supply chain conditions which continue to be under pressure, according to top managers of several electronic and automobile companies.
These executives said early indications from vendors and logistics companies suggest more bottlenecks in the supply of key components during the January-March quarter. These disruptions could increase cost of procuring components and transportation. Manufacturers are concerned about the developing situation and some have already increased their procurement efforts to battle any potential disruptions. The situation is concerning as several automobile and electronic manufacturers were forced to reduce production due to an ongoing shortage of semiconductors.
Bosch Siemens India managing director Neeraj Bahl told Economic Times, the company’s headquarters had cautioned about “severe disruption” in supplies, cost escalation and impact on impact on the supply chain during the January-March quarter—problems that are likely to continue in the next quarter as well.
“In fact, the impact could be felt in the subsequent quarter, too,” he added.
Chairman of the contract manufacturer Dixon Technologies, Sunil Vachani, also anticipates a supply chain impact but hopes it will be limited given that the peak of the Omicron wave was shorter in South Africa.
“The saving grace is that the coming months are not the peak sales period and hence manufacturing will not run at full capacity,” he told the business daily.
Analytics firm IHS Market estimates a production shortfall of 50,000 light vehicles in India during the March quarter owing to the worsening supply situation. IHS Markit associate director Gaurav Vangaal noted the rise of Omicron cases around the world, including China, may further disrupt the global supply chain. He expects a balanced semiconductor supply by the first quarter of 2022 but the lead time to be 26 weeks or longer.
“Longer firm order windows will not guarantee that the supply chain can meet quantities or schedules,” he added.
Supply side constraints led to a production shortfall of half a million light vehicles in 2021, said IHS Markit.
Global electronics manufacturers such as Samsung and Micron Technology have stated that their production facilities in China were operating at much lower levels due to lockdown restrictions.
