Component supply constraints can drive up phone prices: industry experts

This year’s holiday season will likely see fewer launches by smartphone makers, and prices for existing devices could rise 7-10% as players grapple with a severe shortage of components, including semi-chips. drivers, according to industry experts.

Trends such as remote work and home study during the COVID pandemic have led to explosive growth in semiconductor demand that has strained global supply chains around the world. Shipping costs in China have also increased significantly, placing more emphasis on device manufacturers.

China accounts for a large portion of the components supplied for use in electronic products in the country.

According to Counterpoint Research Director Tarun Pathak, the shortage situation will continue to impact the mobile phone industry over the next two quarters.

“The very important holiday season will be impacted in several ways, such as delayed or fewer launches, a 7-10% price increase for existing devices and fewer offers. However, demand is expected to remain strong this holiday season. Among the chip shortage, 4G chipsets are impacted and this should last until the second half of 2021 “, he added.

Pathak stressed that demand is expected to remain strong this holiday season despite these challenges.

While the situation for 5G chipsets is relatively better with the tightening of premium 5G chipsets in the second half of this year, there will be a shortage of consumer (mass market) 5G chipsets.

Kanishka Chauhan, senior analyst at Gartner, explained that India relies heavily on international foundries in the absence of manufacturing facilities (for chipmaking) in the country. While smartphone industry orders are prioritized over other segments by manufacturing facilities given the high volume, this priority has also not completely protected the industry, he said.

“While on the one hand, the rise in chip prices due to the shortage has had a significant impact on the nomenclature of smartphone manufacturers, which is now being passed on to consumers. On the other, it also has an impact on new product launch plans, ”he said. said PTI.

He cited the example of Reliance Jio’s recent postponement of the launch of its 4G smartphone due to a chip shortage.

“Not just Reliance, many other manufacturers have faced similar difficulties due to the chip shortage issue. There is no quick fix to the problem and we expect the shortage situation to continue over the course of time. the next few quarters, ”he said.

In addition, Chauhan noted that the recent container shortage, new COVID closures in some Asian countries, and double bookings from customers make the situation more difficult.

“Along with other chips, display drivers (DDI) and power management integrated circuit (PMIC) are two of the extremely critical chips for the smartphone industry and are suffering from a significant shortage,” said he pointed out.

According to the President of the India Cellular and Electronics Association (ICEA), Pankaj Mohindroo, the global markets for digital products (mainly smartphones, tablets and laptops) have consolidated with a few brands, which are big players with arrangements and deep pockets of the supply chain.

“Mainly, the volumes belong to them and their supply position is comfortable, with the exception of localized problems, for example Vietnam facing some plant closures due to COVID. Their semiconductor supplies are not affected. Indian mobile brands and new entrants face serious challenges, ”he said.

Smartphone shipments in India increased 82% in the June 2021 quarter from a year ago to over 33 million units, with Xiaomi (including POCO) accounting for 28.4% of the share, followed from Samsung (17.7%), Vivo (15.1 percent), Realme (14.6%) and Oppo (10.4%), according to data from research firm Counterpoint.

A spokesperson for Xiaomi said that with the peak of the pandemic at various times across the world, there have been supply chain disruptions and shortages over the past 1.5 years.

“This, coupled with an unprecedented increase in shipping costs, has affected almost every smartphone gamer, including us. Due to a massive mismatch between supply and demand, the majority of components used in smartphones and other electronic gadgets (back panels, batteries, etc.) have seen their prices steadily rise, ”the spokesperson said. .

In addition, the spokesperson said that to ensure there are no supply issues during the holiday season, the company has been working to increase its local manufacturing capacity and has breathed trust that the holiday season will be a big hit.

Realme vice president and general manager for India and Europe Madhav Sheth said chip shortage was a tough problem for the smartphone industry and could prove difficult for some brands to meet pent-up demand during the holiday season.

“Speaking of the impact on pricing, component costs have increased over the past few quarters. The industry has done their best to absorb the prices, but ultimately everyone has to increase the operating prices of a few products in the market to maintain sustainability, as none of the brands, including Realme, can absorb everything, has he declared.

Sheth noted that as production and distribution facilities gradually open up and expand operations, he predicts that the chipset shortage will not abate until after the second quarter of 2022.

Regarding steps taken to address these challenges, Sheth said India is a very targeted market for the company and has felt such a shortage for a long time and has taken the necessary steps to ensure it does not face a shortage of supply.

“We are proactively working with consumer chip manufacturers to stay ahead of the curve with new and powerful 5G processors. We are also exploring our collaborations with growing chip makers who can deliver the best value for money processors without compromising performance in its price segment.

“Realme India had already anticipated the situation and is ready with new launches to respond effectively to the festive demand,” he said.

(Only the title and image of this report may have been reworked by Business Standard staff; the rest of the content is automatically generated from a syndicated feed.)

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