Supply hurdles to limit availability of electronics during festive sales

By Prasid Banerjee
Some ports in China were shut down in recebt months, leading to delays in shipping as well as a rise in ocean freight.

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, TV 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.

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 TVs for multiple brands like Realme, Hisense and Toshiba, prices have shot up to as much as $8,000- 9,000 per container from $2,500-3,000 post-covid.

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, CEO 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 said that the cost of shipping items from China to the US has increased to a whopping $20,000 per 40-foot box. “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.

As a result, orders expected in early October are now expected closer to the end of the month.

“If a laptop maker planned for say 100 units, they are getting 80," noted Singh.

The average selling price (ASP) for laptops in India is above 50,000 and a 20-25% price hike is expected in the mid-premium and premium segments.

Consumers who were planning to buy entry-level laptops during the festive sales may not find what they want. Those who were planning to buy more premium products at hefty discounts will also be disappointed.

Singh noted that some offers, like discounts and cashbacks through credit cards, are still available. However, the festive period would usually see big discounts from the brands, along with the bank offers, if things were normal.

TV makers have had a good run in the festive period so far, but things might become more difficult going forward with IC shortages, increase in raw material prices and supply chain disruption from the recent power crisis in China.


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