Trends such as remote work and study from home during the COVID pandemic have led to an explosive growth in demand for semiconductors that has put enormous pressure on global supply chains across the globe. Freight costs in China have also risen significantly, putting more pressure on equipment manufacturers.
China accounts for a large proportion of the components supplied for use in electronic goods in the country.
According to Tarun Pathak, Director, Counterpoint Research, the shortage situation will continue to affect the mobile phone industry for the next two quarters.
“The all-important festive season will be impacted in a number of ways such as delayed or lesser new launches, 7-10% increase in pricing for existing devices, and fewer offers. However, demand is likely to remain strong this festive season. Chip shortage, 4G chipsets are affected and this H2 is likely to persist till 2021,” he said.
Pathak emphasized that despite these challenges, the demand is likely to remain strong this festive season.
While the position of 5G chipsets is relatively better with the lack of premium 5G chipsets in the second half of this year, mainstream (mass market) 5G chipsets will be in short supply.
Gartner Principal Analyst Kanishk Chauhan said that India has a heavy dependence on international foundries due to lack of fabrication facilities (for chip manufacturing) in the country. Given the high volume of orders from the smartphone industry, the fabrication facilities are prioritized over other sectors, but even the priority has not completely protected the industry, he said.
“While on the one hand, rising chip prices due to shortages has significantly impacted the bill of materials for smartphone makers, which is now troubling consumers. On the other hand, it is also affecting new product introduction plans. is,” he said. told PTI.
He cited the example of Reliance Jio recently postponing its 4G smartphone launch due to chip shortage.
He said, “Not just Reliance, many other manufacturers also faced similar difficulties due to chip shortage. There is no quick fix to the problem and we expect the shortage situation to continue for the next few quarters. “
Further, Chouhan said that the recent container shortage, new COVID lockdowns in some Asian countries and double bookings from customers are making the situation more difficult.
“Along with other chips, Display Drivers (DDI) and Power Management IC (PMIC) are two chips that are extremely important to the smartphone industry and are under a significant shortfall.”
According to Pankaj Mohindroo, President, India Cellular and Electronics Association (ICEA), the global digital products (mainly smartphones, tablets and laptops) markets have consolidated with some brands being the big players with deep supply chain arrangements and wallets.
“Primarily, the volumes are with them and their supply position is comfortable, barring local issues, such as Vietnam facing some factory closures due to COVID. Their semiconductor supply is not affected. Indian mobile brands And new entrants are facing serious challenges,” he highlighted.
Smartphone shipments in India grew 82% to over 33 million units in the June 2021 quarter from the year-ago period, with Xiaomi (including POCO) accounting for 28.4%, followed by Samsung (17.7%), Vivo (15.1%). ) was the place. Realme (14.6%) and Oppo (10.4%), according to data from research firm Counterpoint.
A Xiaomi spokesperson said the pandemic peaked at different times around the world, with supply chain disruptions and shortages occurring over the past 1.5 years.
“This, along with the unprecedented increase in shipping costs, has affected almost all smartphone players, including us. Due to the huge demand-supply mismatch, most of the devices used in smartphones and other electronic gadgets (chipsets, display panels, display drivers) components, back panels, batteries, etc.) have seen a steady increase in prices,” the spokesperson said.
Further, the spokesperson said that to ensure that there is no supply crunch during the festive period, the company is working towards augmenting its local manufacturing capabilities and is confident that the festive period will be a huge success.
Madhav Sheth, Vice President and CEO of India and Europe, Realme, said that chip shortage has been a challenging issue for the smartphone industry and it may prove difficult for some brands to meet the demand during the festive season.
“Talking about the price impact, component costs have increased over the past few quarters. The industry has tried its best to absorb the pricing, but ultimately all have to reduce the market operating price of some products to maintain stability. Have to grow, because no brand, including Realme, can absorb all this,” he said.
Sheth said that as production and distribution facilities open up and gradually expand operations, he expects the chipset shortage to subside only after the second quarter of 2022.
Talking about the steps being taken to address these challenges, Sheth said that India is a highly concentrated market for the company and it has realized such a shortfall long back and has taken necessary steps to ensure that it Do not face shortage of supply.
“We are actively working with mainstream chipset makers to stay ahead of the curve with new and powerful 5G processors. We are exploring our collaboration with growing chipset manufacturers who compromise on performance in their price segment. The best value processors can provide.
He said, “Realme India has already prepared the situation and is ready with new launches to efficiently meet the festive demand.”
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