Around 20-50% of India’s supply of electronic components come from China’s market
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NEW DELHI :
Lockdown in China’s tech hub of Shenzhen following a fresh surge of coronavirus cases may inflate prices of televisions, laptops and smartphones, given that the region is one of the largest suppliers of electronics products worldwide.
Around 20-50% of India’s supply of electronic components come from China with Shenzhen accounting for a large share of it, said Navkendar Singh, research director at the International Data Corporation (IDC). “If we see another round of disruptions or the expected easing-off doesn’t happen, we will certainly see price hikes across brands. And no, most won’t be able to absorb the hike; it will be passed on to the consumer," he added.
Singh said that if the lockdown in Shenzhen city crosses three weeks or more, it will impact shipments of smartphones and personal computers in the latter half of the June quarter as well as the September quarter.
Tarun Pathak, research director at Counterpoint Research, corroborated that prices will start to increase if the lockdown extends beyond 20 March. He added that smartphone prices may go up by 5-7%.
Experts also pointed out that component prices and freight rates have remained elevated over the past year, which means most brands may not be able to absorb the latest cost pressure and will have to pass it on to buyers. “Brands will pass it on to consumers if this extends as already there is a cost pressure due to component shortages," Pathak said.
According to Sanchit Vir Gogia, chief analyst at Greyhound Research, while the scope of the impact will depend on how long the lockdown lasts, customers could be looking at a 20-30% increase. “If the supply chain issue is resolved in the coming quarter, around 10-15% increase can be expected," he said. Analysts say most smartphone brands except Apple operate on thin profit margins of 2-3%. The chips shortage has impacted all these brands already, and the same is expected to continue till at least the end of this year.
Arjun Bajaaj, director, Videotex International, which makes televisions under the Daiwa brand, said prices of raw materials such as high impact polystyrene (HIPS), acrylonitrile butadiene styrene (ABS) and copper have increased. HIPS and ABS are used for electronics housings, while copper is a conducting material. The Russia-Ukraine war has also driven up the prices of neon and palladium, two important components in the semiconductor supply chain.
That said, the current quarter is traditionally a period of subdued product supply for brands because of New Year holidays in China. Many phone brands announce new products during February and March and these products start entering the retail market around this time. Bajaaj pointed out that while some brands will have stocks for 1-1.5 months, the new lockdown could delay product supply.
“If the lockdown is extended, the industry will suffer the consequences, with supply chain disruption creating production slowdown and the end product being delayed, all because India relies on China for raw materials," Bajaaj added.
He expects television prices to rise 7-10% due to the covid-related disruptions in Shenzhen.