Explained: How the global crisps shortage can ruin holiday sales

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The global semiconductor shortage will hurt Indian businesses in the coming holiday season – a time marked by increased sales in various product categories, especially high-value products.

The holiday season typically marks the start of the most economically active neighborhood in the country, and businesses typically enjoy higher footfall and sales during this time. While most companies remain bullish, not all companies are expected to capitalize over the period.

Companies engaged in the manufacture and sale of cars, smartphones, laptops, tablets, consumer durables and various other electronics are at risk of losses during the holiday season as they struggle to keep their production lines running due to the unavailability of chips.

Read | Why retailers are considering the holiday season for a recovery in demand

It can be noted that small microchips play a major role in the production of many new age technological products, including household appliances, communication devices, transportation systems and other critical infrastructure including medical devices.

THE SHORTAGE OF CHIP ENJOYS THE FESTIVE MOOD

The impact of the global chip shortage is already being felt by most car makers in India. The chip shortage has resulted in lower production, delivery delays, lower discounts and higher prices.

The auto industry is expected to experience a substantial loss in sales during the holiday season as the chip shortage has stalled their production lines and supply output remains below demand, which is expected to increase further during the holiday season.

Read also | Buying a car won’t be a cheap deal this holiday season. here’s why

The Federation of Automobile Dealers Associations of India (Fada) recently expressed concern over the current shortage of chips and called it a “crisis in its own right”. Fada said personal vehicle sales could derail during the holiday season as automakers struggle to supply vehicles to dealerships.

It can be noted that the automotive industry accounts for 10 percent of the overall semiconductor demand in India. However, the automotive industry is not the only sector facing a tough job in the coming holiday season.

SALES OF ELECTRONIC PRODUCTS TO BE OBTAINED

Some companies that make premium smartphones, laptops, tablets, big-screen TVs, and other consumer durables have gotten nervous as the holiday season approaches.

While they have yet to experience a crisis similar to that in the auto industry, they are concerned as supplies have started to slow due to production delays. Experts believe that a substantial jump in demand could affect sales during the holiday season.

While sales of large companies like Apple, Samsung and other Chinese brands may not be affected during the holiday season, many other companies could feel the effects.

Read also | Urban consumer spending is expected to increase over the coming holiday season

Besides the chip shortage, prolonged congestion at Chinese ports and container shortages have also contributed to the delay in the supply of finished electronics and components used for local manufacturing.

Arjun Bajaaj, Director of Videotex International Group, said: “The shipment of raw materials for the manufacture of televisions to India has been delayed due to traffic congestion at Chinese ports. The time it takes for raw materials to arrive in India has dropped from 28 to 30 days to 50 days now. “

“This resulted in a delay in the delivery of goods and a complete overhaul of production plans. In addition, for this reason, the cost of sea and air freight has been multiplied by 7 to 8 compared to what it was before Covid, which led to an increase in the overall cost of freight, ”he said. added.

Not only televisions, but the supply of many other high-end electronic products, including game consoles, have been affected due to the current problems.

“Due to a worldwide shortage of chipsets and delays in shipments, plans made by OEM brands have been delayed and in some cases even canceled. For the above reasons, production will not run at its highest capacity during this season, as it did before, which has led to a 60-70% manufacturing capacity, ”said Bajaaj.

“Uncertainty in the market due to Covid, shipping delay, rising freight costs and shortage of chipsets, have turned the lights off for many brands despite the start of the holiday season.”

POSSIBLE PRICE INCREASE

The shortage of goods and electronics seems to be gradually increasing as the holiday season approaches. The shortage of electronic goods has not only been observed in physical markets but also in e-commerce portals.

Popular retailers that sell a wide range of electronics said the situation remained uncertain heading into the holiday season as they were not getting inventory. For example, Vijay’s sales manager, Nilesh Gupta, told The Economic Times that its outlets do not have stock of entry-level big-screen TVs.

Most retailers believe there could be a shortage of products during the holiday season if the supply does not improve. If the situation gets out of hand, the prices of some products could also cost more.

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