Chip shortage is a global reality, may persist till 2022: Bosch

Shortages of chips will impact the car market.

Engineering and Technology company Bosch said that the shortage of semiconductors or chips is a global reality and the impact of this is for the world as much as for India.

Soumitra Bhattacharya, MD, Bosch reiterated what Bosch CEO Volkmar Denner said a few days back, that the shortages of chips will impact the car market and it could remain tight till 2022.

“Chip shortage is a ground reality and it affects the world markets and not just India.

"Tier-1 suppliers like us and our competitors depend on ECUs, which are supplied by tier-2 manufacturers.

"But one has to remember that automotive as a user of the chips is just about 10 per cent, the bulk of these chips are used for non-automotive segments like electronic products, which has seen a surge in demand,” added Bhattacharya.

Bhattacharya, while agreeing that supply chains are getting disrupted due to the chip shortages, the situation will continue to be challenging for CY21.

He also said that globally the company has put in a lot of finances to sort the issue with manufacturers, “but we cannot wish away the challenge.

"At least in India part capacities are being met.

"Unlike in other regions where OEMs have had to shut down,” said Bhattacharya.

In terms of future outlook for the auto industry, he said: “The auto industry was seeing itself on a road of recovery until early this year and Bosch Limited’s positive results is a validation to it.

"However, with the second wave being more severe, there is a clear uncertainty in the market.

"With 80 percent of our revenues driven through mobility business, we have been affected adversely.

"The challenge will be to manage the fluctuating demand, supply chain crisis and changing consumer behaviour all at once.”

The company also saw a dip in its capex plans for FY22 for the first time in several years.

The company will be investing Rs 200 crore as capex for FY22.

In the past the company’s capex would be in the range of Rs 350-500 crore.

“While capex for Bosch India which is the group entity should be in the range of Rs 400-600 crore for Bosch Ltd it will be in the range of Rs 160-200 crore,” said Bhattacharya.

Over the past two years and including this year, Bhattacharya said the company has invested Rs 800 crore in its Adugodi campus in Karnataka.

Photograph: Kim Kyung-Hoon/Reuters