Global chip shortage hits Pakistan

ISLAMABAD:

When a few weeks ago two of Pakistan’s car assemblers said that they would not be able to timely deliver car orders due to shortage of semiconductor chips probably no one would have thought it could even affect their plans to have affordable electricity.

The global shortage of chips has started haunting Pakistani consumers of cars and households that are planning to install solar panels to save their cost of electricity due to soaring power bills. The shortage has affected the prices as well as pushing back the delivery times from four to six weeks, according to the industry players.

More countries are now pushing to produce their own semiconductor chips, which are in short supply globally, because “it’s a matter of national security,” the CNBC quoted a Moody’s analyst this month.

According to media reports, South Korea, China and United States have announced plans to fund semiconductors research and their manufacturing at homes. While many industries have largely recovered from the pandemic disruptions, the solar industry may continue to remain exposed for the next few months, at least.

Semiconductor chips, which are used in a diverse array of industries, including automobiles and consumer electronics, are a critical component of solar inverters - an integral part of solar energy system that converts solar power from direct current to the alternating current that we use in our homes.

The global chip shortage crisis emanated in mid-2020 when countries started imposing lockdowns to counter the Covid-19 spread. With more and more people staying at and working from home, the demand for electronics, and the computer chips they contain, skyrocketed.

The shortage crisis further worsened due to a sharp rebound in demand from the automobile industry in the second half of that year. Ever since then, the severely overloaded semi-conductor industry has struggled to keep pace with the market demand of around 160 industries.

Daily Dawn reported a few days ago that the global semiconductor chip crisis is affecting the supply chain and production of automobiles in the country as buyers face months-long delay in the delivery of vehicles. The chip shortage, which began in the first quarter of 2021 in Asia, hit the global auto industry hard as the demand for semi-conductors increased after lockdowns were lifted.

The nature of the global supply chain disruption is unprecedented. According to Grant Anderson, VP Supply Chain at Jabil - a leading global contract manufacturer “This pandemic is unlike any other crisis in our lifetime.

Read More: Chip stocks at ‘historic low’

The Covid-19 is a unique situation, and its impact has unfurled in successive waves. There has never been a disruption as severe, widespread and unpredictable from a supply chain standpoint.”

On the local front the entire solar value chain is feeling the heat of component shortages. “Our customers may not realise, but this chip shortage has essentially become a force majeure event for solar EPCs. Our vendors in China are now warning us about imminent shortage of PV panels as well,” lamented Renewable & Alternative Energy Association of Pakistan Chairman M Tariq Khattak.

SkyElectric Chief Customer Officer Muneer Farooqui said that customers were frustrated due to increasing electricity bills and summer load shedding on the one hand and delayed system deliveries on the other.

It is a challenging situation. On our side, we are absorbing cost pressures at every leg of the supply chain - sourcing, manufacturing and even logistics, said Farooqui, as suppliers have increased the prices by 6% to 8%.

He hoped that the supply situation of the semiconductor chips, and thus that of the solar inverters, will improve swiftly in the next two to three months.

Driven by soaring electricity tariffs and falling PV costs, solar installations, especially those on rooftop, have shown rapid growth in Pakistan over the last two years. The investments in solar are also supported by the National Electric Power Regulatory Authority (Nepra) Net Metering Regulations, which allow consumers to sell excess solar generation during day time back to the grid.

According to the Alternative Energy Development Board (AEDB), as of end June 2021, a total of 15,402 net metering applications had been processed by various distribution companies in Pakistan. And the number is expected to triple in the next two years. As consumers take matters into their own hands and choose to generate their own solar power, independent of the power grid, installation companies have also proliferated.

“Our customers understand that investing in solar power is a long-term investment that will give them energy savings for many long years. While the current delays are indeed inconvenient, they will soon become a thing of the past,” added Farooqui.

Published in The Express Tribune, August 19^th, 2021.

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