Reliance Jio phone launch has been delayed because of the chip shortage. What does it mean for per se because there is a view in the market that the impending phone launch did the trick for the stock in August. If the chip shortage is so severe, are we in for more trouble for consumer durables, autos and smartphones?
The bigger issue has been that the number of chips they are using in every instrument has been going up and to that extent, the manufacturing capacity has not kept pace. It is also very intriguing from the Reliance side because the AGM happened some 40 days ago and they should have known at that time what kind of chip shortage they are facing and they would already be building stocks. So for them to suddenly come out and say that it is not being launched because of chip shortage, sounds very intriguing to me. The last Rs 200 move has been because of the excitement around that.
I would not know how many people actually want to buy that Jio phone, but in any case that was the excitement. For a lot of consumer durables, the electronic displays are there, the timings are there and wherever electronics are involved, some intelligence is required.
This chip shortage is only going to impact the supply side. Higher inflation could incite demand but right now, demand is not such a big issue because consumer finance is available. It is the supply that is the big issue and the situation will remain tight for many of the companies till middle of 2022. There are reports of huge semiconductor plants being set up globally by the largest kind of TSMC. They have announced some $100 billion of investment. The supply will ease very rapidly at some stage, but right now it seems to be an issue. Secondly, chip prices have apparently been increased 20% from January 1 and that could be another headache for companies where there is a shortage.
