The Indian unit of the world’s largest auto-parts supplier is grappling with a severe shortage of imported components, hampering its ability to cater to the automotive market demand in Asia’s third-largest economy.

“Imports of Bosch India Ltd. has been impacted with severe supply shortage for imported microprocessors (semiconductors), leading to reduced ability to deliver to the automotive market demand in India,” the company said in an exchange filing on Tuesday.

Bosch, which is a key supplier to most Indian automakers, said the steep escalation of demand in consumer electronics industry driven by safety and hygiene sentiments, coupled with the rise of 5G connectivity, has led to surge in global demand of semiconductors.

The supply crunch will have implications for India’s auto industry. “For a lot of OEMs (original equipment makers), they are the single-part vendors, and they have a lot of monopoly in the Indian market,” Puneet Gupta, associate director at IHS Markit, told BloombergQuint. “In diesel they are the leaders,”

“Even (if) one player gets impacted, (it) has an impact on the entire industry,” he said.

German auto suppliers Continental and Volkswagen, the world’s largest carmaker, too warned about an impending shortage of semiconductor components earlier this week.

Bosch said while the automotive industry showed signs of recovery in quarter ended September, it was affected by volatile forecasts and disruptions in global supply chains and planning.

Semiconductors are a critical component in manufacturing of automotive electronics, Deepak Jain, president of the automotive components manufacturers association, told BloombergQuint. Automotive sectors are increasingly dependent on chips for everything from anti-lock braking systems to computer management of engines for better fuel efficiency, he said.

“We have been talking about localisation of semiconductors given how important the component is within the electronic framework.”

By ev3v4hn