Smartphones to be dearer as makers struggle with chip shortage

Customers who wait for months to buy phones and electronics at discounted prices during the festive season, may be in for a rude shock as disruption in global supply chain and resultant shortage of chips and electronic components may make them shell out more money this time around.

There has been a gap in supply of semiconductor chips while prices of components required for smartphones have seen a steady escalation in the past year for several reasons including closure of factories due to COVID-19, container shortages, increase in shipping cost and rise in demand for automobiles and consumer electronics.

According to Times of India, analysts and industry officials have said that several mass-market phone models have been priced at 8-10 per cent of their actual price by brands this year. Interestingly, several cellphone brands, which usually wait for the festive season to launch new models haven’t made any such announcements yet.

Upasana Joshi, associate research manager of International Data Corporation (IDC) told TOI that the average selling price of several smartphones has been raised from $155-163 to around $180 in the recent quarters mostly due to rising prices of original equipment manufacturer (OEM) and availability of more 5G models in the market.

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“However, e-commerce sales are going strong this year despite the ‘Shradh’ season as platforms offer upfront discounts and exchange programmes,” Joshi said.

Counterpoint Research analyst Prachir Singh told TOI that although rates of some models have risen by 5 to 10 per cent, brands are trying to cover the cost by re-launching models with new chipsets, remodeling phone accessories, and employing novel marketing gimmicks.

An analysis by Counterpoint Research also found that some of the smartphone vendors and OEMs have received only 70 per cent of orders for key components.

The study predicts the situation to get “worse” by Q3-2021, prompting the firm to reduce its shipment forecast for 2021 to 6 per cent growth against its earlier projection of 9 per cent.

Quoting an executive from a price-comparison site, the TOI report said that mass models from smartphone companies like Oppo, Vivo, Xiaomi and Realme have increased by at least 10 per cent (in the range of ₹500-1,000).

Confirming the same, a Xiaomi official said it has taken initiatives to boost its local manufacturing capabilities.

“Despite the new changes, we will continue on our promise of maintaining only a 5 per cent profit margin on hardware and optimize our costs such that we can offer the best price we can to the consumers,” the official said adding that the company has sold more than two million phones in just four days this festive season.

Experts in the industry say the paucity in electronic components could continue for some time before receding by the second half of 2022. This will not only create a crisis for the smartphone industry, but also increase the waiting period and price of phones for customers.