Consumer electronics prices set to rise after holiday season

NEW DELHI : Persistent weakness of the rupiah against the dollar should trigger a new round of price increases among consumer electronics manufacturers after the end of the holiday season sales.

The rupee has fallen almost 9% against the dollar so far this financial year to hit a new all-time low of 82.32 Friday.

Analysts said if the ongoing festival sales see great deals on electronics items, prices could rise significantly after the sales.

“The falling rupiah will definitely have an impact on prices,” said Navkendar Singh, associate vice president, device research at IDC India, South Asia and ANZ. He said suppliers could not afford any impact on already subdued demand over the holidays. period, but will eventually have to undertake price corrections. A new round of broad-based price increases can be expected in November, Singh said.

“We expect a 5-7% increase in (smartphone) prices once the holiday season is over, say November or December, due to the increase in the exchange rate. All new models, including those on 5G, will see a price hike,” said Prachir Singh, senior research analyst at Counterpoint Research.

Sanyam Chaurasia, a technology market analyst at research firm Canalys, also said sellers can no longer take the pressure of a weak rupee and will have to pass it on to consumers. Foreign currency has been a problem for businesses for the past 18 to 20 months, and “if this continues, we can expect another surge in (price of) devices in the coming months,” Chaurasia said.

Smartphone makers in India are exposed to currency fluctuations as they still assemble phones from semi-knocked down kits (SKDs) instead of full manufacturing. Companies therefore import parts such as screens and integrated circuits in a partially disassembled state to manufacture the final product. A low rupee inflates the cost of these parts and also that of the finished product.

“There is almost a 97-98% SKD for most smartphone vendors. If you import, you have to pay additional currencies. The further depreciation of the dollar and the rupee will further impact sellers,” he said.

Consumer electronics manufacturers are very worried. “The depreciation of the rupiah is the biggest challenge at the moment, leading to reduced margins and increased working capital,” said Arjun Bajaj, general manager of Daiwa, a local television brand. Bajaj, who is also a director of television maker Videotex International, said talks had already started in the industry regarding suppliers raising raw material prices, adding that price revisions would be decided next month.

Similarly, Prashanth Mani, Managing Director of Motorola Mobility India, said gains from lower component prices, especially semiconductor chips, were offset by a weak rupee.

“The (input) costs go down but the exchange rate goes up, so it kind of cancels out. Say you get a 5-10% cut, but the exchange rate has gone up 12% over the past last six months, so that’s the challenge,” he said.

Mani said businesses are maintaining current inventory prices, but will be forced to pass on higher costs to consumers for fresh inventory.

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