chip shortage inflates smartphone prices

© Provided by The Times of India

Chennai: Global supply chain constraints and shortage of chips and other electronic components is weighing heavily on consumers’ pockets this festive season.

Even as e-commerce platforms woo consumers with cashbacks, EMIs and trade-in campaigns, analysts and industry officials say prices of many mass-market phone models currently being sold are 8-10% high. The festive season is also a preferred time for smartphone brands to launch flagships, but that hasn’t happened this year either.

IDC’s associate research manager Upasana Joshi said that average selling prices (ASPs) of smartphones is up from $155-163 to around $180 in recent quarters, partly due to rising cost for OEMs and more 5G models in the picture. “However, e-commerce sales are going strong this year despite the ‘Shradh’ season as platforms offer upfront discounts and exchange programmes,” she said.

Prices are up 5-10% on certain models due to rising component prices, but brands are finding ways to be competitive by re-launching models with new chipsets, tweaking accessories that come with the phone, and through various promotions, Counterpoint Research analyst Prachir Singh said.

Counterpoint found in an analysis that some smartphone OEMs and vendors are receiving only around 70% of requests placed for key components, “and the situation seems to be getting worse as we move through Q3 2021”. The firm has lowered its shipment forecast for 2021 to 6% growth compared to 9% projected earlier. An executive with a price-comparison site also said that mass models from brands like Xiaomi, Oppo, Vivo and Realme have recorded increases in the range of Rs 500-1,000 (around 10%).

Xiaomi officials told TOI it took proactive steps to ramp up local manufacturing capabilities earlier this year to beat global supply chain issues. “Despite the new changes, we will continue on our promise of maintaining only a 5% profit margin on hardware and optimise our costs such that we can offer the best price we can to the consumers,” a company spokesperson said. The brand has sold over two million smartphones in just four days of the festive sale across channels, it added.

Analysts say the components’ shortage is not likely to abate until the second half of 2022 and will turn into a crisis for the smartphone industry then, translating into longer wait times and increased retail prices for consumers.

Semiconductor chips have been in short supply and component prices on the rise in the past year for various reasons, including factory closures globally due to the Covid pandemic, container shortages, increasing shipping costs, and sharp rise in demand for automobiles and consumer electronics due to pent-up demand. Apple CEO Tim Cook had warned in July that supply constraints will affect sales of the iPhone as well as the iPad. Shortages aren’t there in the high-powered processors, but in computer chips that carry out functions such as driving displays or enabling audio, Cook had said then.

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