Indian Handset Industry: Now, China power crisis hits Indian handset industry

Indian Handset Industry: Now, China power crisis hits Indian handset industry

The handset industry is running at ‘historically low inventory levels’ with the latest power crisis in China adding to the already existing challenges around component shortages and supply chain hurdles, triggering market trackers to lower annual shipment targets further.

Counterpoint Research has cut its 2021 forecast further to 164 million units from 170 million, and TechArc, by another 2-3% from its expected 165 million. Others such as IDC and Canalys are keeping a close watch on the situation in an industry that is factoring in further delays in product launches.

“The outages are having an impact, but we see the situation stabilising in 3-6 months with a marginal impact on the supply chain. All these factors put together, including container shortages, has brought the industry inventories to historical lows,” said Pankaj Mohindroo, chairman of industry body India Cellular Electronics Association (ICEA).

China has been grappling with acute power shortages over the last few months and now several provinces are reportedly facing blackouts. Pick-up in manufacturing demand and measures to lower consumption of fossil fuels have led to these shortages. Manufacturing units have been asked to operate for limited hours and this is affecting all major importers, including India.

The spillover impact of the power crisis, along with increased freight prices due to container crunch and component shortages may lead to drop in shipment for India.

“The shipment numbers may fall from 170 million this year to 164 million. There will be increased dependency on manufacturing hubs in Taiwan and Japan for components,” said Neil Shah, partner at Counterpoint.

Techarc founder Faisal Kawoosa added that the impact will be mostly felt by the smaller handset players rather than the likes of Samsung, Apple and Xiaomi, because their supply chain partners are already factoring in supplies to these large customers.

Market research firm IDC said it will be watching the developments over the next few weeks.

“Of course, had this happened a few weeks back, the impact would have been severe on festive sales,” said Navkendar Singh, research director at IDC. “However, if every other logistical and supply challenge starts tapering off in the next two months, then the impact would not be felt much since the shipments will coincide with the lean season” after Diwali.

So far in the July-September quarter, analysts have estimated 50-52 million units shipped, compared with 47.2 million units two years earlier. The numbers which were run up to the Diwali sale period, would have been higher had it not been for the supply crunch.

The new set of challenges from China will take some time to make a landfall. Sanyam Chaurasia, research analyst at technology market research firm Canalys, expects the impact to show December onwards because so far handset firms have managed to stock up to meet the Diwali demand.

“Overall production speed will slow down; output will go down substantially, and shipments will further get delayed. We expect further delays in components by 1-2 weeks if this is not restored immediately,” Chaurasia added.

ET reported that consumer durables, including smartphones and cars, are facing a lag in supplies and some of the new launches are delayed. This has also led to a price hike of 5-15% with brands relaunching phones with different chipsets.

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