Chip shortage inflates smartphone prices


CHENNAI: Global supply chain constraints and shortages of chips and other electronic components weigh heavily on consumers’ pockets this holiday season.
Even as e-commerce platforms attract consumers with rebates, EMI, and exchange campaigns, analysts and industry officials say that the prices of many mass-market phone models currently being sold are between 8% and 8%. 10% higher. The holiday season is also a preferred time for smartphone brands to launch flagships, but that hasn’t happened this year either.
IDC Associate Research Manager Upasana Joshi said that the average selling prices (ASP) of smartphones increased from $ 155-163 to around $ 180 in recent quarters, in part due to rising costs for OEMs and more 5G models in the picture. “However, e-commerce sales are strengthening this year despite the ‘Shradh’ season, as platforms offer upfront discounts and exchange programs,” he said.

Prices jumped 5-10% on certain models due to rising component prices, but brands are finding ways to be competitive by relaunching models with new chipsets, tweaking the accessories that come with the phone, and through various promotions, Counterpoint Research analyst Prachir singh said.
Counterpoint found in an analysis that some OEMs and smartphone vendors are receiving only about 70% of requests made for key components, “and the situation appears to be getting worse as we move into Q3 2021.” The firm has lowered its shipping forecast for 2021 to 6% growth compared to the 9% projected previously. An executive with a price comparison site also said that massive models from brands like Xiaomi, Oppo, Vivo and Realme have recorded increases in the range of Rs 500-1,000 (around 10%).
Xiaomi officials told TOI that it took proactive steps to increase local manufacturing capabilities earlier this year to overcome global supply chain problems. “Despite the new changes, we will continue our promise to maintain only a 5% profit margin on hardware and optimize our costs so that we can offer the best possible price to consumers,” said a company spokesperson. The brand has sold more than two million smartphones in just four days of the holiday sale across all channels, he added.
Analysts say component shortages are not likely to subside until the second half of 2022 and turn into a crisis for the smartphone industry at that time, which will translate into longer wait times and higher retail prices. for the consumers.
Semiconductor chips have been in short supply and component prices have risen in the past year for various reasons, including global factory closures due to the Covid pandemic, container shortages, rising shipping costs, and strong increased demand for automobiles and consumer electronics due to pent-up demand. Apple CEO Tim cook warned in July that supply restrictions will affect sales of the iPhone as well as the iPad. There is no shortage in high-powered processors, but rather in computer chips that carry out functions like driving displays or enabling audio, cook he had said then.

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