Global chip shortages and other supply constraints in the electronics sales may be a downer for consumers’ festive buying plans this year. According to industry executives and analysts, companies in the laptops, televisions and smart homes segment have had to shift their focus to mid-premium and premium devices in the absence of adequate supplies. As a result, consumers won’t see big discounts during the festive sales, and 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 that companies know they will sell whatever products they can source, the problem at the moment is 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 to use air freight, leading to supply constraints there too, which in turn led to an increase in prices.
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 $8000-$9000 recently per container, from a usual price of $2500-$3000 post Covid. In addition, the supply of certain other materials, like motherboards etc., have also increased by 10-15% and are expected to go up further in coming days. He also said that air freight, which is an alternative to shipping, has also 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 the issues are happening on international waters, there’s not much the 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 is 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’re getting 80,” noted Singh. The average selling price (ASP) for laptops in India is above Rs. 50,000 and a 20-25% price hike in the mid-premium and premium segments is expected.
In sum, 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 huge 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 themselves, along with the bank offers, if things were normal.
TV makers like Marwah and Bajaj 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 cut in China.