Geopolitical conflict to impact global semi-conductor supply
News: As per media sources, the ongoing conflict between Russia and Ukraine could potentially disrupt supply of key raw materials (Neon gas, palladium metal) used for manufacturing semi-conductor chips and can limit their supply in the near term. Neon gas finds application in lasers used for designing semi-conductor chips while palladium metal is used in sensor chips and computing memory.
Views: Global and domestic automobile production was already impacted by chip shortage in CY21 with the situation expected to gradually ease in CY22E. However, with the present conflict there exists a risk of further supply side constraints over chips availability, which can potentially impact global and domestic automobile production. In case supply side issues get prolonged, it is negative for the entire space i.e. OEM as well as ancillary. This, coupled with higher aluminium prices, is likely to further impact gross margins of coverage companies in the near term