Russia-Ukraine conflict will further worsen chip shortage

Tribune News Service

New Delhi, March 4

The Russian-Ukraine war hit the Indian stock markets for the third day running and the rupee slipped further against the dollar while the ongoing chip shortage may worsen further. Stock markets fell for the third day with the Sensex and Nifty posting losses as the risk-off sentiment prevailed.

The rupee also fell below the 76-mark for the first time this year and settled at an 11-week low. As a result, forex reserves fell by $1.4 billion to $631.5 billion due to a dip in currency assets.

But the most devastating would be the exacerbation of the current chip shortage that has already hit the bottomlines of Indian automakers. Of the two key raw materials for making chips, Russia controls 44% of world’s palladium supplies and Ukraine produces 70% of the world supply of neon.

Though chip-making companies have stockpiled resources, the chip shortage will get worse impacting almost all industries such as automakers, electronic device manufacturers, phone makers and many other sectors that are increasingly reliant on chips for their products to work, warned a report from Moody’s.

The shortage of chips will come on top of rising oil prices which are now around $111 a barrel.

With shipping costs also likely to remain elevated, the expectation is India will face inflationary pressures in the coming days.

Automakers worst hit

• Russia controls 44% of world’s palladium supplies and Ukraine produces 70% of the world supply of neon
• Though chip-making companies have stockpiled resources, the chip shortage will hit automakers, electronic device manufacturers and phone makers

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Tribune News Service

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