A surprise price cut awaits electronic items in festive season

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If you are planning to buy TV sets, computers, mobile phones, or similar consumer electronics items in the next few months, you might be in for a surprise drop in the prices, thanks to crashing shipping rates and prices of components, The Economic Times has reported. The drop in transport tariffs and component prices is expected to be a win-win for both the consumers, who would burn their pockets less and the companies that would be able to shore up their margins.

A likely third benefit could be boosting demand that has been lukewarm for the past several months. While high inflation has been identified as a dampener of demand in India since the last year’s festive season, a decline in prices might boost the rising force of declining inflation to trigger demand.

Usually, the festive season in autumn around Diwali usually accounts for the bulk of the sales of many items in this country including consumer electronics.

Driving the expectation of a drop in prices is a sharp decline in freight rates. Containers that used to take about $8,000 to transport from China to India at the height of the Covid crisis now cost $850-1,000.

While sea transport was getting cheaper, the lack of demand in the west due to economic slowdown and recession have crashed prices of semiconductors to about 10% compared to the prices during the pandemic. Quoting industry experts, the newspaper said that prices of electronic components are down by 60-80%.

Globally chip manufacturers have come up with red bottom line in the last quarter due to dipping prices and declining demand. In January-March 2023, Intel reported its biggest quarterly loss. It was also the fifth successive quarter when the MNC suffered falling sales figures.

“Prices for components for all electronic products and freight have crashed to pre-Covid and in some cases even slightly lower due to a global fall in demand and recession in some countries,” said Atul Lall, managing director, Dixon Technologies India. Dixon Technologies is one of the most prominent contract manufacturers.

Janina Group MD Pradeep Jain said that the prices of all smartphone components including camera units and chips have crashed. He hoped that brands might adopt the strategy of passing off some of these benefits to the consumer, a step that could boost demand significantly, especially before the festive season.

Companies are also looking forward to this unexpected bonanza to boost their margins. Havells, Blue Star, and Dixon Technologies have already indicated that their margins might go up this year.

Fall in open cell prices in the global markets has driven down the average selling price of its consumer electronics portfolio from Rs 16,400 in 2021-22 to about Rs 11,500 in 2022-23 – a drop of 30% — the management of Dixon Technologies had said.

Anil Raj Gupta, chairman of Havells India, had told analysts “There will be some normalization of margin levels to the previous level, what we used to have.” He attributed it to cooling off of raw material prices.

Without a doubt any drop in prices would help boost the sagging demand in India. Market researcher said in January-March 2023 the sales of mobile phones declined 16% (YoY) and that of computers dropped by 30% (YoY) during the same period.