China shutdowns hit Indian electronics companies

KOLKATA: Smartphone and consumer electronics companies in India said they were staring at production cuts and possible delays in launch of new products due to the coronavirus outbreak in China that has disrupted component supplies. The scale of the impact would depend on how long the disruption continues.China accounts for 75% of total value of components used in TVs and almost 85% in case of smartphones. All critical components like mobile displays, open cell TV panels, printed circuit boards, capacitors, memory and LED chips are imported from China. Air conditioner compressors and washing machine motors are also among sourced from that country.Chinese vendors have hiked component prices by 2-3% due to supply shortages triggered by factory shutdowns, and this could rise further unless the situation improves in the next few days.‘Not prepared for extended holiday’The hike in component prices, in turn, could result in an increase in product prices in India.The coronavirus has been blamed for more than 130 deaths so far, with nearly 6,000 confirmed cases as of Tuesday. The virus has rapidly spread across China and to 16 other countries. Media reports said industrial activity in China has come to a standstill, and may be impacted further.“Factories in India were prepared for the usual Chinese New Year shutdown. But several cities there have extended the holiday, and companies have asked workers not to report for work for the next few days. This will likely have an impact on manufacturing in India since the extended holiday was not factored in,” said a senior executive at a leading smartphone brand, who requested anonymity.Vacation extendedThe New Year holiday was scheduled to end on January 31, but authorities in several Chinese cities have extended the vacation till February 9, and this could get prolonged further. Hong Kong, the main gateway to China for freight and business, too has suspended cross-border travel for now. “Production will be badly hit. There will be at least 15-20 days’ delay in supply of components. We have closed our purchase office there. New product launches will be delayed. If this continues, there will be chaos since no company holds stock in large quantities due to fluctuating input prices and subdued domestic demand,” said Avneet Singh Marwah, CEO of Super Plastronics, the company that sells Kodak and Thomson brand televisions in India.BPL India chief operating officer Manmohan Ganesh said several Chinese component makers had hiked prices by 2-3%. “This could go up further if the shortage continues, and then brands will be forced to hike prices,” he said. Two industry executives said Chinese smartphone brands may face problems in software R&D work and component supplies, which would hit India production. A spokesperson for Xiaomi said India operations weren’t affected right now since the company had planned for the shutdown during New Year.73753018 Alternative suppliersApple CEO Tim Cook said during an earnings call on Wednesday that the company is working on a mitigation plan to make up for any production loss in China, and is tapping alternative suppliers. Consumer Electronics & Appliances Manufacturers Association president Kamal Nandi, however, said it would be difficult to quickly develop alternative supply sources for components. Nandi, also the business head at Godrej Appliances, said the industry operates with 20-30 days of raw material inventory.Sunil Vachani, chairman at homegrown contract manufacturer Dixon Technologies, said shortages and production disruptions were likely if Chinese factories didn’t open after the extended holidays.

from Economic Times https://ift.tt/3aSxyK7