China’s covid curbs may hit festive season phone sales
Premium- Disruption in parts supply to crimp production in India in coming months, squeezing sales
NEW DELHI : India may face a shortage of components for smartphones and electronic devices in July-September because of covid-led disruptions in manufacturing activity in China’s electronics hubs such as Shanghai and Shenzen, which in turn, will impact sales in the festive months of October-December.
The resurgence of covid cases in many Chinese cities, including major electronics manufacturing hubs, have led to reduced output and supply constraints, besides creating port congestion, which is bound to create downstream supply chain challenges and hurt production in India, according to analysts tracking the sector.
“There is significant potential for China’s ongoing pandemic crisis to rattle supply chains and cause a pandemic redux yet again. As such, with the ongoing supply-side shortages and spike in prices, smartphone brands in India will potentially see significant challenges in the immediate future," said Prabhu Ram, head of industry intelligence group, CyberMedia Research.
“It is indeed a matter of concern. For the festive season to remain unscathed, the situation in Shenzen and Shanghai must be sorted out latest by June-end," said Faisal Kawoosa, founder at research firm TechArc.
The September quarter is important for supplies or sell-ins as most brands place orders for components of smartphones and other electronic devices, to stock up for the festivals.
Sales of electronics typically peak in October-December during Navratri, Dussehra, Diwali, Christmas, and New Year. Thus, placing orders in advance is critical, considering that brands also launch new models in the run up to the festive season.
The China covid situation has exacerbated an already volatile supply situation, analysts said. The upstream semiconductor supply chain is facing hurdles because of low levels of neon production as a consequence of the ongoing Russia-Ukraine conflict. Rising oil prices are also fuelling inflation and that is resulting in a rise in the cost of transportation and logistics, as well as operational costs, for companies across the board. The impact of this is already visible.
“We are witnessing an impact in Q2 2022 (April-June). Brands are cutting back on orders and there is an uncertainty. A prolonged lockdown in these regions will certainly have an impact on the overall electronics industry," said Prachir Singh, senior research analyst, Counterpoint Research.
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With high inflation affecting consumer behaviour, the market may see an average performance in the April-June quarter.
As such, brands will have to strategize for the festive season and Q3 2022, with product launches, offers, and discounts to maximize sales, he said.
“Price and supply will remain under immense stress in the third quarter. It is still two months away. If lockdowns ease up by July, there may be hope of sustenance," said Navkendar Singh, research director, IDC India.