It was expected that supplies from China will be back to normal by end-June as their factories are now operating at nearly 90 per cent of normal capacity. But the recent issue with shipments has placed an obstacle that manufacturers can’t bypass.
The ongoing friction between the port and Customs authorities in India and China may derail electronics manufacturers’ plans for recovery before the festive season starts.
With consignments stuck at ports in the two countries, manufacturers now fear a severe impact on their festive season plans if the issue is not resolved by mid-July.
As the authorities hold back consignments from China at Indian ports, leading manufacturers are stuck in limbo.
After disruption in supplies from China between March and May, shipments began to revive only in June.
Most manufactures had been expecting shipments of key electronic components in larger quantities as their inventories were nil.
However, with consignments now stuck they are fearing a further delay in scaling back production levels to pre-Covid times.
“The plan is to scale up production to normal levels by mid-July. Over 60 per cent of our product models are not available any more as pent-up demand after the lockdown consumed whatever little quantitates we were left with.
"It was expected that supplies from China will be back to normal by end-June as their factories are now operating at nearly 90 per cent of normal capacity. But the recent issue with shipments has placed an obstacle ahead of us that manufacturers like us can’t bypass,” said a top executive of a leading smartphone company.
According to Navkendar Singh, research director at IDC, it may further delay the recovery for the electronics manufacturers in India.
“Physical checking of all consignments, especially for electronics goods, is unfeasible.
"We are totally dependent on China for several key components like printed circuit boards and display panels.
"Given the delicate nature of these components, unboxing them for a physical check may totally damage the items”, he said.
Display panel that forms over 60 percent of the cost of a flat panel television and over 15 percent for smartphones, are manufactured in a highly controlled environment and bringing them out in a normal environment may make it unusable.
Further, if the issue is not resolved by mid-July manufacturers plans for the festive season to get hampered.
While the season begins from mid-September, all major players including Xiaomi, Samsung, Vivo, Oppo and Apple, begin stocking up finished handsets from end-June, to meet the surge in demand during Durga Puja and Diwali.
With no inventory left to meet the current demand, their festive season supply plans have already got delayed this year.
S K Saraf, president, Federation of Indian Export Organisations, in a letter to the commerce ministry said, the physical examination of all consignments from China is not only delaying the process but also adding import cost.
Urging the ministry to clear any air of confusion among customs officials about additional checking of Chinese consignments, he informed the government that Chinese authorities are retaliating by holding several shipments at their end.
According to the data from the Ministry of Commerce, manufacturers in India imported Rs 10.7 trillion worth of telecom and handset equipment in 2018-19, while for TVs, it was Rs 95,500 crore.
Between April 2019 and February 2020, imports on these two accounts stood at Rs 8.54 trillion.
According to sources, Chinese companies like Xiaomi, Vivo, Realme, Oppo, OnePlus, TCL, Techno, Lenovo and Motorola, are considering all options, including a representation to the government.
While all of them are assembling in India, they are heavily dependent on imported TV and handset parts from China.
Estimates suggest, over 50 per cent (of cost of material) of the components are imported from the neighbouring country by the prominent brands.
Industry analysts said, while Chinese firms are more dependent on Chinese consignments, no electronics firm can survive without them.
“There are no handsets or TV sets that are sold today that do not have China’s contribution in it”, said Singh.
Photograph: Reuters
