According to officials of different companies and analysts, due to supply chain disruptions, the Q1 will be impacted with lower volumes and depending on the situation, Q2 is also expected to be soft.
The Indian electronics sector, primarily smartphone firms, are bracing up for supply chain disruptions as Covid cases are rising fast in China. Due to the spread of Omicron variant, China’s major electronics hub Shenzhen has been shut down. Indian manufacturers have a lot of dependency on this hub. If the situation does not improve in two-three weeks, there could be serious consequences for India’s electronics manufacturing ecosystem.
According to officials of different companies and analysts, due to supply chain disruptions, the Q1 will be impacted with lower volumes and depending on the situation, Q2 is also expected to be soft. Further, the logistics will become costlier, putting more pressure on companies in terms of pricing.
Shenzhen and Shanghai have been shut down for a week as COVID cases continue to rage in mainland China. Shenzhen is a major port and one of the major electronics manufacturing hubs in the world.
“If the factories have been shut down, definitely there will be an impact. It is an area of concern and we have to watch the development closely,” George Paul, CEO of IT hardware body MAIT said.
The industry, however, is hopeful that given the zero Covid policy of China, the outbreak is likely to be controlled by China. If by March 20, the situation improves, it would be comfortable because companies usually take excess inventory. But if the situation continues for longer, say two-three weeks, two things can happen — first the products will not reach on time and second there would be pressure on logistics making it costlier, said Tarun Pathak, research director, Counterpoint.
“We might be staring at a very modest Q1 and very slow start to the Q2 numbers,” Pathak said. As per Counterpoint, though India witnessed its highest ever smartphone shipments in 2021 at 169 million units, the October-December quarter saw a decline due to supply issues plaguing the smartphone manufacturing ecosystem.
India’s electronics manufacturing ecosystem is primarily dependent on supplies from China –be it sub-assemblies and other components. Earlier last year also, due to supply chain disruptions, the smartphone manufacturing in the country had suffered. Due to the supply chain issues, last fiscal, no company barring Samsung, was able to meet production targets under the production-linked incentive (PLI) for smartphones.