Laptop users watch out. Your favourite personal computer could be out of stock in stores and online retailers over the next few weeks.
Reason? A global semiconductor shortage is now impacting the availability of the electronic chips used in laptops.
Electronic dealers told Moneycontrol that this scarcity is expected to last for at least eight to ten weeks. Moneycontrol had earlier reported how the global semiconductor shortage had hit the automobile makers hard.
“This is not particular to India. We have been informed that the shortage is due to sudden surge in demand for laptops and inadequate supply of chips amidst remote working,” said Ashfaque Siddiqui, owner of electronics retailer, Siddiqui & Co, in Mumbai.
In this country, the domestic laptop market is estimated to be US& 6 billion, with an annual growth of 18 percent. Large players in India include HP, Dell, Lenovo, Acer, and Asus.
India does not have local semiconductor manufacturing capacity and imports all the chips/circuits from Taiwan, which is considered the world’s largest production hub for computer chips.
What are semiconductors and how are they used in laptops?
Semiconductors are tiny chips that control the critical functions of an electronic device. Mostly made from Silicon, this tiny device controls the basic functions of products such as smartphones.
For example, when you search for a product on your computer or try to access your email on the laptop, it is this semiconductor chip that implements these functions and provides accurate solutions. These chips are the core of any device and hence a shortage would mean that production must be halted.
The manufacturing process for such devices requires a specialised facility called semiconductor fabs (semiconductor fabrication plants). Even a tiny speck of dust that is not visible to the naked eye can hamper the chip’s efficiency. Hence, it takes several years of experience and completely dust-free factories to produce these chips.
Why is there a shortage?
When the Coronavirus-linked lockdown was announced across the globe from March 2020 onwards, all stores and production facilities had to shut down. In India, manufacturing was totally closed for close to seven weeks across sectors.
By June 2020, the Unlock phase was announced, production activities had resumed wholly, and stores started to open. Amidst this, work-from-home (WFH) was being followed across companies. Schools and colleges had also moved classes online.This led to a sudden rise in demand for laptops among working professionals and students. Moneycontrol had reported earlier how demand for products like laptops had surged by close to 50 percent due to WFH.
So, while the demand escalated, semiconductor makers were not entirely prepared. ‘Revenge buying’ was also reported in several parts of the globe, especially China, leading to a further shortage.
“Professionals across China suddenly wanted to upgrade their devices and electronic store sales for laptops soared from July onwards. With the Chinese New Year around the corner, laptops are among the most sought-after gifts since WFH continues. So, all the production capacity is being diverted to this sudden demand, which is leading to this shortage,” said the deputy director-India and South Asia for a global semiconductor maker.
Industry sources said that semiconductor makers are working on overcoming this shortage, but it could take close to two months for the situation to normalise.
Bhaskar Purkayastha, who owns Global Electronics at Chandni Chowk in Delhi, admits that they are primarily selling older version of the laptops from their existing inventory.
“Newer products are taking time to hit the market. We are now seeing one household with two to three laptops for working couples and their children, as against one laptop earlier. Even though the three laptops could be basic ones, it has led to increased demand and inventory is getting wiped out,” he added.
According to Purkayastha, ever since the Diwali sales period, demand for laptops have shot up by close to 60 percent in the Mumbai and Delhi electronics markets alone!
His store also has a branch in IT-hub Bengaluru, which has seen close to 30 percent surge in sales.
"The expectation was that people will start going back to physical offices from January 2021 onwards. But that is not the case. Working constantly on personal laptops also means that it could be subject to wear-and-tear and hence upgradation is required," said Chirag Sharma, who owns a string of stores in Kolkata's Bow Bazaar electronics market.
The senior vice president of a multinational IT devices manufacturer told Moneycontrol that in the first stage, entry-level laptops could see normalcy by next month.
"In India, the highest demand is for laptops in the Rs 15,000-20,000 range. Hence, this is a segment where shortage is high," he added.
Could having local production help?
The government is already working on developing semiconductor production facilities in India. Moneycontrol had reported that semiconductor fabs for electronic devices like laptops and mobile phones would be set up with tax incentives.
The Ministry of Electronics and Information Technology (MeitY) has already worked out a Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS). Here, it is proposed to offer financial incentives of 25 percent of capital expenditure for the manufacturing of goods that constitute the supply chain of an electronic product.
Under this project, production of items like chips, diodes, optical fibre preform, circuits and semiconductor wafers will be incentivised, among others. India is surely, if slowly, moving in the right direction.