Supply constraints may dampen festive season sales
NEW DELHI: Global chip shortages and other supply constraints may hit sales of electronic items this festive season.
According to industry executives and analysts, companies in the laptop, television and smart home segments have had to shift their focus to mid-premium and premium devices in the absence of supplies.
As a result, consumers won’t see big discounts during the festive sales. The premium devices that are available will be in limited supply—and possibly at 20-25% higher prices.
“This is a classic situation of supply not matching demand. And when that happens, companies prioritize segments where they have higher margins,” said Jaipal Singh, research manager at market research firm International Data Corporation (IDC).
He said companies know they will sell whatever products they can source, the problem being that of supply.
While a crippling chip shortage has plagued the industry over the past year, new issues have come up over the past few months.
Some ports in China were shut down, leading to delays in
shipping and a rise in ocean freight. Companies tried air freight, but there were supply constraints there too, which in turn led to an increase in freight charges.
According to Arjun Bajaj, director of Videotex International, which makes televisions for multiple brands like Realme, Hisense and Toshiba, prices of containers have shot up to as much as $8,000-9,000 per container from $2,500-3,000 postcovid.
In addition, prices of materials like motherboards have also increased by 10-15% and are expected to go up further in the coming days. He said air freight has increased by 6-7 times over the past few weeks.
Avneet Singh Marwah, chief executive officer of Super Plastronics Ltd, a brand licensee for Kodak, Thomson and Blaupunkt TVS, said the delays and increase in cost of freight is related to global geopolitics.
He said since these are playing out on international waters, there’s not much the Indian government can do.
He pointed out that the cost of shipping items from China to the US has increased to a whopping $20,000.
“The profits they (the shipping companies) have made in the last two quarters are equivalent to the profit they had made between all of 2008 and 2019,” he added.