Global Chip Shortage: Global semiconductor shortages will hurt Indian businesses during the upcoming festive season – a period that will see higher sales across various product categories, especially high-value items.
The festive season usually marks the beginning of the most economically active quarter in the country and businesses typically enjoy higher customer numbers and sales during this period. While most companies remain optimistic, not all businesses are expected to capitalize during this period.
Companies engaged in manufacturing and selling cars, smartphones, laptops, tablets, consumer durables and various other electronic products are likely to suffer losses during the festive season as they struggle to keep their production lines running due to the unavailability of chips Is falling
It may be noted that tiny microchips play a major role in the production of many new-age technological items including appliances, communication devices, transportation systems and medical devices, among other critical infrastructure.
Global Chip Shortage: Chip shortage spoils the festive mood
The impact of the global chip shortage is already being felt by most automobile manufacturing companies in India. Chip shortages have resulted in reduced production, delayed delivery times, lower discounts and higher prices.
The auto sector is likely to suffer huge sales losses during the festive season as chip shortages have blocked their production lines and supply remains below production demand, which is expected to increase further during the festive season.
Automobile dealers’ body Federation of Automobile Dealers Association of India (FADA) recently expressed concern about the ongoing chip shortage and termed it as an “absolute crisis”. Fada said that sales of private vehicles could derail during the festive season as automakers are struggling to supply vehicles to dealers.
Significantly, the auto industry accounts for 10 per cent of the total semiconductor demand in India. However, auto is not the only sector that will face an uphill task during the upcoming festive season.
Global Chip Shortage: Sales of electronic goods will be affected
Some companies that make smartphones, laptops, tablets, large-screen televisions and other premium consumer durables are jittery ahead of the festive season.
Though he hasn’t felt an auto industry-like crisis yet, he is worried as supplies are beginning to slow down due to production delays. Experts believe that a huge jump in demand during the festive season could affect sales.
While the sales of big companies like Apple, Samsung and other Chinese brands may not be affected during the festive season, there are many other companies that may feel the pinch.
In addition to chip shortages, prolonged congestion at Chinese ports and a lack of containers have contributed to delays in the supply of finished electronic goods and components used for local manufacturing.
Arjun Bajaj, director, of Videotex International Group, said, “The shipment of raw materials for television manufacturing to India has been delayed due to traffic congestion at Chinese ports. The time taken for raw material to reach India has increased from 28-30 days to 50 days now.”
“This resulted in a delay in the delivery of goods and a complete revision of production plans. Additionally, due to this, sea and air freight cost has increased by 7-8 times as compared to pre-Covid, resulting in an increase in overall freight cost,” he said.
The supply of not only television sets but several other premium electronic items including gaming consoles has been affected due to the ongoing issues.
“Due to the global shortage of chipsets and delay in shipments, plans by OEM brands have been delayed and in some cases even cancelled. Due to these above reasons, the production during this season will not run at its highest capacity as it used to be earlier, resulting in manufacturing capacity being reduced to 60-70 per cent,” said Bajaj.
“Uncertainty about the market due to Covid, delay in shipments, increase in freight cost and shortage of chipsets have dimmed the lights for many brands despite the onset of the festive season.”
Global Chip Shortage: Potential price rise
As the festive season approaches, the shortage of electronic goods and products seems to be increasing gradually. Shortage of electronic goods has been observed not only in physical markets but also in e-commerce portals.
Popular retailers selling a wide range of electronic products said the situation remains uncertain ahead of the festive season as they are not getting stocks. For example, Nilesh Gupta, director of Vijay Sales, told The Economic Times that his outlet had no stock of entry-level large-screen TV sets.
Most retailers are of the view that there could be a shortage of products during the festive season if the supply does not improve. If the situation gets out of control then the prices of some products can also become expensive.