Business News

This holiday season, your TVs, phones, and PCs could be less expensive.

Prices of most electronic components for television, mobile phones, appliances and computers, and the freight cost of shipping them to factories have eased to pre-Covid levels after touching record highs in the last two years.

Companies may pass on some of this input cost decline to consumers Diwali onwards to boost demand that has been tepid for almost the last 12 months, industry executives said.

The easing cost pressures are also expected to lift the operating profit margins of consumer electronics companies.

Freight cost for containers from China has plunged to $850-1,000 compared with a peak of $8,000 during the height of Covid. Prices of semiconductor chips have crashed to an all-time low, almost one-tenth of Covid times, while those of electronic components are down by up to 60-80%, the executives said.

“Prices of components for all electronic products and freight have crashed to pre-Covid and in some cases even slightly lower due to a global fall in demand and recession in some countries,” said Atul Lall, managing director of Dixon Technologies India, one of the largest electronics contract manufacturers.

“The broad pricing outlook remains the same for next few months, with some minor changes here and there.”

Pradeep Jain, MD of Jaina Group, which manufactures smartphones for several companies apart from selling their own electronic products, said prices of all smartphone components including chips and camera modules have crashed.

“Brands may pass on some of these as aggressive pricing to help revive the market around the festive season,” he said.

Listed electronics companies like Dixon Technologies, Havells and Blue Star had indicated in last quarter’s earnings calls that their margins would likely improve this year.

The Dixon management had said the average selling price of its consumer electronics portfolio has come down to around ₹11,500 in 2022-23 as compared to ₹16,400 in 2021-2022 due to a drop in open cell prices globally.

Open cell is the most important and costliest component of televisions.

Havells India chairman Anil Rai Gupta told analysts that “there will be some normalisation of margin levels to the previous level, what we used to have”, since raw material prices have now stabilised and settled.

Interestingly, some industry executives said freight cost has gone up by 4-5% in the last couple of weeks, but it is due to a drop in demand.

Electronics brand Haier India president Satish NS said containers are not getting filled due to weak demand and hence freight operators are demanding higher prices in case they need to ship the components immediately or are asking us to wait.

“But overall, component prices across the board have come down,” he said.

Globally, chip companies reported record losses last quarter due to weak demand and a fall in prices. Intel reported its largest quarterly loss of all time in the January-March period, which is also the fifth consecutive quarter of falling sales for the semiconductor giant. The world’s largest memory chipmaker, Samsung, posted a 95% fall in operating profit last quarter that yielded the smallest profit for any quarter in 14 years. Companies have cut production amid a continued fall in chip prices.

In India, the demand for discretionary products such as TV, mobile phones and appliances has been muted after last year’s Diwali season as consumers shied away from spending due to high inflation, increase in interest rates and job losses in the tech sector.

Market researcher IDC India in its recent reports said the Indian smartphone market had declined 16% year-on-year in the January to March quarter, while the computer market dropped a steeper 30%.

Softer prices together with easing overall inflation could now revive demand.



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