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Delay in Chinese supplies to see 30% drop in production

Delay in Chinese supplies to see 30% drop in production

Kolkata: Smartphones, electronics and white goods manufacturers in the country expect their production to fall 20-30% in March because their Chinese component suppliers would take another 7-10 days to resume production in full scale as the novel coronavirus scare lingers.

The brands fear this would have a spiralling impact on their sales in April-June quarter.

“The entire supply chain is impacted,” said Kamal Nandi, president of consumer electronics industry association CEAMA and business head at Godrej Appliances. “There will be an impact on March production which will create a setback on April-June revenue due to lower availability of finished goods.”

Chinese component suppliers on Monday informed Indian manufacturers of smartphones, televisions, refrigerators, washing machines and air-conditioners that there would be further 7-10 days’ delay in production, senior executives said.

Most Chinese factories had set Monday as their reopen day after an extended Chinese New Year holiday due to the deadly coronavirus outbreak that has so far affected more than 40,000 people and claimed more than 900 lives. However, with several cities still under lockdown many of them have extended their holidays till February 17, executives said.

Even those that opened factory gates on Monday have skeletal staff since travel within the country is still restricted with the Chinese government using all means to fight the epidemic, they said. Also, component makers are facing issues with supply of raw materials.

Avneet Singh Marwah, CEO of Super Plastronics, which sells Kodak and Thomson televisions in India, said the firm’s March production will get affected by 30-40% especially in fastest selling models like 43-inches-plus screen sizes. “This will have an equivalent impact on sales,” he said.

India imports 85% of smartphone components from China, while for television it is 75% including the television panel. For refrigerator and air-conditioner compressors, again the industry is heavily dependent on China, while washing machine motors too are imported. Microwave ovens are imported from China as finished goods.

“Unless brands use air freight, there could be production slippage in India next month since some factories have partially opened without too much worker attendance,” said Sunil Vachani, chairman at Dixon Technologies, a homegrown mobile phone and electronics contract manufacturer.

Brands mostly use the sea route to ship products due to high costs of air freight, and it takes 25-30 days for components to reach the factory gate of Indian manufacturing units after they leave the factories in China.

Eric Braganza, India president of China’s largest home appliances maker Haier Appliances, said there is no clarity yet on when the production can resume in China. “In case it pushes further, it will become a huge challenge to continue production here,” he said.

A senior executive of a leading Chinese smartphone maker said in situation like this, there could be an impact on India sales next quarter unless component supplies regularises in seven days.

Xiaomi India said it has no update on the production. “We will continue to adopt all measures to ensure the safety of our employees and partners,” a company spokesperson said. “For now, there is no impact on launches in India.”

Mails sent to Oppo, Vivo, Realme, Samsung and LG remained unanswered as of press time Monday.

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