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Business News/ Technology / Gadgets/  Rise in prices of smartphones, laptops unlikely to halt anytime soon
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Rise in prices of smartphones, laptops unlikely to halt anytime soon

The supply chain will take more time to recover from the disruption of last 2 years, analysts say

The average selling price of laptops, which was around ₹50,000 when the pandemic started in 2020, rose to ₹65,000 in 2021.mintPremium
The average selling price of laptops, which was around 50,000 when the pandemic started in 2020, rose to 65,000 in 2021.mint

NEW DELHI : The shortage of components, especially chips, throughout 2021 has increased the prices of major consumer electronics goods, such as laptops and smartphones, by almost 10%.

The growth in prices is unlikely to abate soon as the supply chain will take more time to recover from the last two years of disruption, industry analysts say.

The prices have increased owing to a chip shortage, an increase in the supply cost, and also decisions taken by brands to bring in mid-to-premium products to India, especially in the PC segment, according to Navkendar Singh, research director at market research firm International Data Corporation (IDC). Brands focused on more expensive products because of the tight supply situation “as a margin play", he said. The average selling price (ASP) of laptops, which was around 50,000 when the pandemic started around the first quarter of 2020, increased to 65,000 in 2021, he said.

India shipped more PCs in 2021 than the year before, but PC brands have struggled to meet demand from SMBs and enterprises. The demand-supply gap remained a challenge for most brands, despite focusing on a few segments, according to IDC.

“In the smartphone segment, the ASP has increased by almost 10% as the components issue has impacted every brand," said Tarun Pathak, research director at Counterpoint Research.

This is also reflected in the wide gap in growth seen in different price segments. For instance, the shipments of under 10,000 segment, which accounted for 30% of all smartphone shipments in the December quarter of 2021, dropped by 5% compared with the past year, whereas shipment in the above 20,000 segment, which accounts for 23% of all shipments, grew by almost 100%. This also indicates that brands are prioritizing components for high-value products in the smartphone segment.

Two-thirds of users always go for an incremental upgrade over their previous phones, according to Pathak. People are upgrading to mid-segment smartphones. “There was no supply in low-end devices. As a result, vendors were pushing models that are close to 20,000. There was no shortage of 5G chipsets, which is why whatever vendors were getting from the supply side, they used it," said Sanyam Chaurasia, research analyst at Canalys. It is a reason why 5G shipments rose six-fold, though the rollout of 5G services is not expected anytime soon.

Component prices were at an all-time high in 2021, Chaurasia said. This has grown by 20% for most components and the increase is more in displays, particularly for AMOLED panels. Chipset prices have increased by 18% to 20%. As a result, “the gross expenses for all the vendors have increased by close to 21% and this is impacting the end consumer retail price," he said.

The Centre has announced a 76,000 crore incentive-based scheme to boost semiconductor manufacturing in India and several players have expressed plans to take it up and set up units in India. However, it will take years before those units become operational. Intel, too, announced investments of $20 billion to set up fabs in the US, which will be up and running by 2025.

The ongoing global chip shortage is expected to continue in 2022, even if it does not worsen, owing to the increase in covid-19 cases, particularly of the Omicron variant, credit rating firm Moody’s said earlier this month. The median inventory for consumers in semiconductor products has fallen from 40 days in 2019 to less than 5 days in 2021, a January report by the department of commerce of the US showed.

The scenario will not change much in 2022, Singh said. Either it will remain the same or we may even see some hike in prices, Chaurasia concurred.

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ABOUT THE AUTHOR
Abhijit Ahaskar
Abhijit writes on tech policy, gaming, security, AI, robotics, electronics and startups. He has been in the media industry for over 12 years.
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Published: 28 Jan 2022, 01:29 AM IST
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