Consumer Electronics, Auto Companies May Reduce Production from April Due to Chip Crunch

electronicsConsumer electronics and automobile manufacturers in India are considering slashing production from April as supplies of components from China and Hong Kong have dried up in the past week or so, owing to the imposition of lockdown in parts of China after a surge in Covid-19 cases, said industry executives.

Consumer electronic companies will be forced to cut production from next month while companies importing finished goods from China may face inventory shortages too, said the executives.

Automakers, too, are weighing the situation, considering China is one of the largest component sourcing markets, they said.

“Shipments are already delayed by 10-15 days, which will impact production next month,” said Pradeep Jain, managing director of Jaina Group, which retails Karbonn and Sansui brands.

Homegrown mobile phone and computer maker Lava International’s chairman, Hari Om Rai, said prices can go up, apart from a further delay in availability of components.

Key Sourcing Base
Vinnie Mehta, director general, Automotive Component Manufacturers Association, said China is a key sourcing base for many commodities and components for the Indian automotive industry and the lockdown there may add to the supply chain woes the Indian industry is facing. The issue was also discussed at a recent executive committee meeting of the association, he said.

“The auto sector is already facing a lot of headwinds – from the spike in commodity prices to supply chain disruption because of the geopolitical crisis to the semiconductor shortage. This will add another element of uncertainty and cost,” said Mehta.

Several Chinese cities are in lockdown due to a record number of Covid-19 cases – including in technology capital Shenzhen – due to China’s zero-Covid policy. This has increased the congestion at several Chinese ports, while border movement to Hong Kong, which is another important transit point of Chinese cargo to India, has also been restricted, said the executives.

Delayed Impact
Firms such as Apple’s iPhone manufacturer Foxconn and automakers Toyota and Volkswagen have been forced to suspend some operations in China, according to media reports.

“Since the industry has increased the raw material holding period to 30-45 days, the impact on production will be felt in April,” said Kamal Nandi, business head at Godrej Appliances.

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