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About 5-10% demand impacted due to supply chain disruptions

Many companies are experiencing delays as a result of vessel shortages or diversion of ship routes. This is in addition to the disruptions to the global supply chain and chip shortages. This has caused freight prices to rise 7 to 8 times compared to pre-Covid levels.

Saurabh Gupta (CFO), Dixon Technologies stated that his company is experiencing a 5% to 10% decrease in demand for semiconductors.

The finance chief stated that it could take up to three quarters for the situation to return to its previous levels. Gupta stated that if the shortage persists beyond the time expected, it could have an impact on demand and margins. However, he said that he was optimistic that the shortage would end within 2 to 3 quarters.

The semiconductor shortage has a major impact on the electronics and auto industry. There are only five countries that supply the chip: China, Taiwan Japan, South Korea, South Korea, the EU and the US. These countries are experiencing high demand and mismatch in supply. Due to pandemic restrictions, many countries have not yet sealed their borders.

Online education and work from home have increased the demand for electronic products and semiconductors that manufacturers didn’t anticipate.

The impact
Due to the shortage of global chips, there is an economic crisis in shipping. This has led to uneven economic recovery. According to news reports, freight costs have risen by 300% since the onset Covid.

Gupta stated that the “Ocean freight cost” has increased by 7-8x compared to pre-Covid levels. This resulted in an increase in freight costs.

Companies face this cost as a significant business expense. Dixon Technologies was able to absorb most of the price rise and alleviate the margin pressure by using a combination of calibrated price hikes, inventory planning, and value engineering.

Many Indian exporters are experiencing delays in their shipments of over a month. Many businesses have found this a major problem on the liquidity side. Season jitters

The government is currently in negotiations with exporters to assist them with international container shortages. However, the electronics and automobile industries are feeling the strain.

Gupta said they are better positioned. Dixon Technologies, a manufacturer of consumer electronics and lighting, has large inventories of crucial components, including semiconductors. He also said that they have enough supplies for the forthcoming festive season.

“Demand during the festive season looks good, and we have a very healthy order book across all sectors. He said that although we have increased our production, there are still supply-side issues.

How can we fix it domestically?
The Federation of Indian Export Organisations requested a freight support program from the government until the end of fiscal, when freight rates will likely normalize.

However, India is launching various schemes to make it self-reliant, such as production linked incentive programs for telecom, auto, and AC lights, and LED lights. It is important to also look at India’s manufacturing ecosystem to ensure that India has a stable supply chain over time.

It takes a lot of time and investment to set up a new unit, or expand the manufacturing ecosystem of semiconductors. Gupta stated that it will take several quarters for the supply chains to become normalized and normalcy return. RVPG Media

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