Many smartphones are currently being sold at 8-10% high due to global supply chain constraints and shortage of chips, says industry officials. The ongoing COVID-19 pandemic has made it difficult and expensive for manufacturers and firms to get hold of industrial inputs. Rapid political developments, a shift towards consumers buying niche products, and, now, global pandemics have revealed the weakness that lies at the heart of manufacturing.
Upasana Joshi, IDC’s associate research manager, said the average selling prices of smartphones is up from $155-163 around $180 in recent quarters, partly due to rising cost for OEMs and more 5G models in the picture. “However, e-commerce sales are going strong this year despite the Shradh season as platforms offer upfront discounts and exchange programmes.”
Prachir Singh, Counterpoint Research analyst, said prices are up 5-10% on certain models due to rising component prices, but brands are finding ways to be competitive by re-launching models with new chipsets, tweaking accessories that come with the phone, and through various promotions.
According to ToI, Counterpoint in an analysis found that some smartphone OEMs and vendors are receiving only around 70% of requests placed for key components. The firm has lowered its shipment forecast for 2021 to 6% growth compared to 9% projected earlier. Analysts believe the components’ shortage is not likely to abate until the second half of 2022 and will turn into a crisis for the smartphone industry then, translating into longer wait times and increased retail prices for consumers.
Meanwhile, Chinese smartphone giant Xiaomi took proactive steps to boost local manufacturing capabilities earlier this year to tackle global supply chain issues. A company spokesperson said that despite the new changes, Xiaomi will continue on its promise of maintaining only a 5% profit margin on hardware and optimize its costs such that the company can offer the best price to the consumers.