I’m sure you’re aware of the great semiconductor shortage around the world presently due to pandemic crisis. Thanks to the Covid-19 pandemic yanking the world’s electronics supply chain like a yo-yo (too little demand, too much supply, too much demand, too little supply), there’s a shortage of all kinds of semiconductor chipsets that go into cars, phones, routers, microwaves or pretty much anything that runs on electricity these days. The yanking of this yo-yo started ahead of the pandemic, as the US under Donald Trump tried to reduce its dependence on Chinese electronics manufacturing. The pandemic just made things much, much worse.
The result is that there’s now a global semiconductor boom. Taiwan-based semiconductor maker TSMC, worth $552 billion, is now Asia’s most valued company and the world’s 9th most. But if semiconductors are the building blocks of cars, devices and appliances, then APIs (active pharmaceutical ingredients) are the building blocks of medicines and vaccines. The comparison gets eerier. There’s a global API shortage and boom. Which started with country initiatives to reduce dependence on China, which exports between $40-50 billion worth APIs each year and is the undisputed leader. The pandemic, made things worse. There was a severe shortage of APIs the world over (there still is). The yo-yo swung between companies being unable to source adequate APIs to make drugs, to ordering six to nine months worth of APIs at a time instead of the normal three months. Supply shortages lead to manufacturing booms.
Which is what a host of Indian API makers are hoping to cash in on. Leading the pack is Glenmark Life Sciences, a company hurriedly spun out by its parent Glenmark Pharma, one of India’s leading pharma companies. It’s likely to list on the stock exchanges tomorrow. There’s also Divi’s Laboratories, Laurus Labs, and Aarti Drugs—all having seen a crazy rally in their share prices—which are collectively investing over $1.2 billion in adding more capacity. But the thing with supply chain yo-yos is that shortages and boom times are usually followed by gluts and bust times. India’s API makers will be hoping to shave off 10% of China’s market share (that’s $4-5 billion) before that happens. Will they be able to?
