Testing time for consumer electronics makers ahead of festive season

The months leading up to the festive season will be uniquely challenging for consumer electronics makers

If the past one-and-a-half years has been challenging enough for the country’s electronics and appliances makers, the next two quarters are surely going to test their mettle. With repeated lockdowns, massive loss of sales and a harsh bus­i­ness environment, a large section of the manufa­cturers has already faced the storm. But the current component shortage, logistics hurdles, steep inflation and a possible third wave of the Covid-19 pandemic are keeping them on their toes.

The industry — spread across categories like personal and household electronics, appliances to smart and computing de­vices — accounts for annual sales of over Rs 3.5 trillion in In­dia. The pandemic-indu­ced disruptions, however, have impacted revenues of several key segments like air conditioners, refrigerat­ors and televisions even as it provided unexpected impetus to catego­ries such as notebook computers, tablets and smartphones.

Sales of most of the items have recovered since hitting a nadir in mid-2020 during the nationwide lockdown. But after subdued business for over a year, the su­rvival of many fringe play­­­­ers now depends on ma­rk­e­t traction in coming months.

Take AC makers, for example. After a complete washout in the April-June 2020 quarter — the traditio­nal peak season — sales have recovered to 75 per cent of the pre-pandemic levels in 2021. According to industry veteran B Thiaga­rajan, managing director of Indian AC major Blue Star, operations have recovered to normal since the unlocking process began in June.

A steep rise in component prices and shortage of shipping containers, however, forced the company to raise prices 11 per cent in the past eight months — in two tranches. Blue Star pla­ns to raise prices again during the festive season. The problem is one that impacts the nature of de­m­and. “The steady rise in prices is pushing consumers towards downgrading,” Thiagarajan said.

For other large appliances and electronics categories, the situation is similar. Suguru Takamatsu, head of Consumer Sales Division at Panasonic India, a full-range player, said, “With the unlocking of economy after the second wave, we are witnessing a gradual rise in demand for our value-proposition appliances such as smart 4K TVs, connected range of ACs, refrigerators, washing machines, microwaves and other life­style appliances.” Even so, Panasonic has in­cur­red losses of 60-65 per cent against sales projections for the June quarter.

 

Deepak Bansal, vice-president, corporate planning at LG Electronics India, said the company witnessed “a challenging business environment” during the second wave. But with markets reopening in June, the firm has registered good momentum across product categories. “We could register high double-digit growth compared to the first half of 2020,” he said. In July, LG’s business grew 20 per cent year-on-year.

Meanwhile, Mumbai-headquartered Godrej Appliances has recorded 60 per cent YoY growth last month, after suffering loss of sales in April-June. According to Kamal Nandi, business head and executive vice-president at the durables maker, the market is now set to grow steadily irrespective of the challenges. With consumers now spending more time at home, their need for larger and superior quality home appliances is a key driver for growth, which he expects will continue in the next two quarters.

In spite of a double-digit spike in prices of all large appliances and electronics, manufacturers are adopting different strategies as they do not expect prices of commodities and components to come down anytime soon.

To keep potential consumers hooked, Godrej has lined up a premium and feature-packed ran­ge of washing machines and refrigerators. Pan­asonic is banking on internet of things (IoT) and artificial intelligence-based connected appliances such as ACs, refrigerator, washing machine, Wi-Fi fans and smart digital switches, ap­art from easy consumer finance options, cash backs and discount deals.

DURABLE CHALLENGES

• Sales of durables have recovered to 75% of pre-Covid-19 levels in August after dipping by 65% in April and May
• Manufacturers are struggling with 10-40% rise in component and logistics costs
• Prices of AC, refrigerator, TV and washing machine have gone up 10-20% in one year
• Notebook and tablet sales grew in April-June but remain below pre-Covid levels
• Demand for smart computing devices like laptops, tablets and smartphones is high but shortage of chipsets is a major hurdle
• Manufacturers are now hoping to beat a possible 3rd Covid-19 wave with one-channel strategy, newer products and WFH-related needs

In the consumer technology space, the extent of losses this time has been lower, given the de­mand for notebooks, tablets and smartphones turned ess­ential with most people either working or studying digitally. Industry estimates suggest sales of laptop and computers grew over 15 per cent in the June quarter, compared to the 2019 levels. Apple, traditionally a premium player, registered record sales in India for the June quarter, its CEO Tim Cook said last week.

According to Count­er­point Research, a global tech industry research, analysis and strategic consulting firm, overall shipment of smartphones surged 82 per cent to 33 million units YoY and remained only eight per cent lower than 2019 levels as a severe chipset shortage and lockdowns impaired most manufacturers from supplying enough quantities.

According to smartphone and smart TV manufacturers, the supply shortage of chipsets and display panels has already forced them to raise prices trice in the past one year but the trend is expected to continue as India is completely dependent on imports.

However, most leading players such as Xiaomi, Oppo, Realme, Samsung and Apple, with an omni-channel presence, are less worried about a probable third Covid-19 wave disrupting operations again. Madhav Sheth, vice-president of Realme and CEO of Realme India, earlier told Business Standard that despite challenges, he expects to grow by 10-15 per cent YoY.

The large appliance makers are hopeful, too. “We are very bullish about good sales as we can already see revival in the overall business environment,” said LG’s Bansal.

Godrej’s Nandi expects to grow over 20 per cent during the festive months that contribute about 30 per cent to annual sales. “Things are gradually returning to normal, with more than 95 per cent of the market now open,” he said. “We are already seeing a positive trend in consumer demand this month, and we anticipate that, like other industries, consumer durables will see strong demand in the coming months, with the festive season round the corner.”