Smartphone, TV prices may rise with Covid-19 resurgence in China

With the Shenzen region in China under lockdown again on the back of a fresh surge of Covid-19, the prices of consumer electronics products including televisions, PCs and smartphones in India may rise again since the former is one of the largest suppliers of electronics products in the world.

Around 20-50% of India's supply of electronic components come from China with Shenzhen accounting for a large share of it, said 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. And no, most won't be able to absorb the hike, it will be passed on to the consumer," he added.

Singh added that if the current lockdown in Shenzhen remains for more than three weeks or so, it will impact smartphone and PC shipments in the latter half of the second and third quarter of 2022. Tarun Pathak, research director at Counterpoint Research, corroborated that prices will increase if the lockdown extends beyond March 20. He added that smartphone prices may go up by 5-7%.

Experts also pointed out that component and freight prices have been at a premium over the past year, which means that most brands may not be able to pass this new hike and will have to pass it on to the customers. “Brands will pass it on to consumers if this extends as already there is a cost pressure due to component shortages," Pathak noted.

According to Sanchit Vir Gogia, chief analyst at Greyhound Research, while the scope of the impact will depend on how long the lockdown lasts, customers could be looking at a 20-30% increase. “If the supply chain issue is resolved in the coming quarter, around 10-15% increase can be expected,” he added.

Analysts also noted that 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. The global shortage of semiconductor chips has hence impacted all of these brands already, and the same is anyway expected to continue till at least the end of the year.

Arjun Bajaaj, Director, Videotex International, the manufacturer of televisions under the Daiwa brand, pointed out that the cost of raw materials too has increased. This includes high impact polystyrene (HIPS), acrylonitrile butadiene styrene (ABS), copper, and more. HIPS and ABS are used for electronics housings, while copper is a conducting material. This is coupled with the fact that Russia and Ukraine’s conflict 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 the February-March period, which start coming into the country around this time. Bajaaj pointed out that while some brands will have stocks for 1-1.5 months, the new lockdown could delay product supply.

“If the lockdown is extended, the industry will suffer the consequences, with supply chain disruption creating production slowdown and the end product being delayed, all because India relies on China for raw materials," Bajaaj added. He expects a 7-10% increase in the cost of TVs.