TV, smartphone costs may rise over China covid surge
The scope of the impact will depend on how long the fresh lockdown lasts
NEW DELHI: The prices of consumer electronics products, including televisions, personal computers, and smartphones in India may rise again with the Shenzen region in China, one of the largest suppliers of electronics products in the world, under lockdown again following a fresh surge of Covid-19 cases.
The Shenzhen region accounts for 20-50% of component supply, according to 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,” he said.
If the current lockdown in Shenzhen remains for more than three weeks, it will impact smartphone and PC shipments in the second and third quarter of 2022, Singh said.
Prices will increase if the lockdown extends beyond March 20, corroborated Tarun Pathak, research director at Counterpoint Research. Smartphone prices may go up by 5-7%, he said.
Component and freight prices have been at a premium over the past year, experts pointed out. “Brands will pass it on to consumers if this extends as already there is a cost pressure because of component shortages,” Pathak noted.
The scope of the impact will depend on how long the lockdown lasts, but customers could be looking at a 20-30% increase, according to Sanchit Vir Gogia, chief analyst at Greyhound Research. “If the supply chain issue is resolved in the coming quarter, an increase of about 10% can be expected,” he said.
Most smartphone brands run a thin margin business, which means that barring Apple, most brands have a profit margin of 2-3% on their products, analysts noted. The global shortage of semiconductor chips has hence impacted all these brands already and this is expected to continue till at least the end of the year.
The cost of raw material has also increased, pointed out Arjun Bajaaj, director, Videotex International, the manufacturer of televisions under the Daiwa brand.
This includes high impact polystyrene, acrylonitrile butadiene styrene, and copper, which are used for electronics housings, while copper is a conducting material. This is coupled with the fact that the conflict between Russia and Ukraine has impacted the supply of neon and palladium, which are two important components of the semiconductor supply chain.
That said, the first quarter of the calendar year is a low supply quarter for brands because of New Year’s holidays in China. Many phone brands announce new products during FebruaryMarch and these start coming into the country around this time.Some brands will have stocks for 1-1.5 months, but the new lockdown could delay product supply, Bajaaj pointed out.
“If the lockdown is extended, the industry will suffer the consequences, with supply chain disruption leading to production slowdown and the end product being delayed, all because India relies on China for raw materials,” Bajaaj contended. He expects a 7-10% increase in the cost of TVs.