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Acute shortage of components derail handset players comeback plans

Acute shortage of phone parts such as display, memory and chipsets is plaguing the comeback plans of domestic handset companies—Lava, Micromax and Karbonn—who are being forced to delay launch schedules and cut down on production, dealing a setback to their efforts to take on their stronger Chinese rivals.

Jaina India Managing Director Pardeep Jain told ET that because of the shortage of components and consequent skyrocketing of their prices, Karbonn’s smartphone re-entry plans have been impacted.

“We are now targeting March 2021 to launch our phones in the Rs 6,000-Rs 10,000 price category. With the government’s policy, we are now focusing on increasing visibility of Karbonn in the market. We have increased investments in R&D already,” said Jain.

Jaina Group owns the Karbonn brand and also has the licence for Gionee and Sansui in India.

The supply constraints, which started in mid-2020, have driven up prices sharply of key components such as displays, which is making it difficult for brands to manage bill of materials, especially for sub-Rs 10,000 phones. Ocean freight charges have also increased by three times in the past 10 months, which is not expected to ease out in the near term, executives say.

“The biggest challenge for Indian brands is planning because there is no visibility for next 2-3 months for sourcing components,” said Tarun Pathak, research director at Counterpoint. “Global brands get priority whenever there is a supply crunch because of their volumes but for Indian companies it becomes tougher, especially when they are competing in the sub-Rs15k segment with low margins and huge competition.”

Indian handset brands hold less than 1% share in the smartphone market, which is close to 154 million units by volume and dominated by Chinese bands such as Xiaomi, Oppo, Vivo and Korea’s Samsung. Backed by the government’s production-linked incentive (PLI) scheme, Lava, Karbonn and Micromax have been trying to launch new smartphones—especially in the under-Rs10,000 price segment—to gain some share.

But the acute component shortage is hurting their efforts.“Supply chain for Chinese brands is more advanced and structured than Indian brands,” said Navkendar Singh, research director at IDC India. “It is because of their global standing. The upstream supply chain is much structured for Chinese brands and they place larger volume orders hence get preference over new brands which are Indian companies in the current scenario.”

Sunil Raina, president of Lava International, said that while the chipset shortage situation is easing out, there is a severe shortage of displays in the market. Lava has recently re-entered the smartphone space.

“Shortage will increase, that is what we are getting to hear… Like everyone, we may also face issues. Chipset pricings have not increased but display prices have gone up. Due to duty hike, there was an impact and shortage has increased prices further up for displays,” he added.

Micromax, which made its comeback with ‘IN’ branded smartphones in November 2020, said it had more launches planned last year, which got delayed due to chipset shortage.

“This has not just impacted us as a brand, but the industry as a whole. Our strategy going ahead will be to spread out our upcoming launches so that we are able to meet the consumer demand and ensure that the supply chain doesn’t get adversely impacted,” a Micromax spokesperson said.

India’s second largest electronics manufacturer Dixon Technologies, which makes smartphones for LG, Nokia and Motorola said, though the shortage is impacting the output, its production timeline is intact. Koliasa


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