After China’s state-owned Sichuan Airlines announced the suspension of its cargo operations to India for 15 days, citing the COVID surge in the country, smartphone brands such as Oppo, Vivo, Xiaomi and several handset contract manufacturers are exploring alternate options of air cargo carriers to import components.
“This might lead to component prices shooting up in the near term if other airlines replicate similar restrictions. This clubbed with already short in supply chipsets will add further mounting pressure on production in India,” said Upasana Joshi, associate research manager-client devices, at research firm IDC India.
Despite a global component shortage and increased covid infection risk in India, manufacturers are putting their best efforts to keep Indian manufacturing operations up and running.
“I think the government of India should intervene and support the smartphone industry here to arrange for logistics to ensure smooth supply of components,” said Faisal Kawoosa, founder and chief analyst of research firm TechArc.
“Otherwise, these players will be left to explore options from the open market, which will definitely push up costs of components, which anyways will not go well at this juncture when the demand is already shirking due to the prevailing Covid situation in the country,” he added.
As per reports, smartphone companies are being forced to increase prices by 10-15%, because a depreciating rupee and shortage of key phone parts continue to jack up the total bill of materials (BOM) for handset brands.
Cost of display panels has almost doubled in the global market, memory chipsets are seeing a 20% increase in cost, battery packs prices have risen by 10% and others, including camera modules and sensors, are also dearer by 5%.
The airlines’ decision to ban flights to India has added to the smartphone companies’ logistics hurdles putting them under the spot. With added pressure manufacturers may even decide to cut down production because consumer demand is anyway waning amid lockdown, experts believe.
Vivo is expected be hit the hardest as the brand is already facing an embargo by seven airlines, including global and local ones, after one of the Vivo consignment caught fire at Hong Kong airport earlier this month.