Coronavirus outbreak: Electronics companies stare at uncertain future

The recent outbreak of a novel coronavirus in China may affect Indian electronics and appliances majors’ business plans if the pandemic continues to spread till the second half of February. 

As a large number of components continue to be imported from the neighbouring country, makers of mobile handsets, air conditioners, television sets and refrigerators may face a supply crunch in coming months. With Chinese officials shutting manufacturing a large number of items, till February 9, local industry bodies like CEAMA and ICEA and manufacturers keep a close watch on developments.

According to Pankaj Mohindroo, chairman of ICEA, which has all major electronics and handset manufacturers in India as its members,  has issued an advisory to its members. “So far, the impact has been minimal due to natural stock pile ahead of the Chinese New Year. If the problem persists beyond February 10 then it will be problem.”

According to Kamal Nandi, president of CEAMA and executive vice-president of Godrej & Boyce: “If the shutdown in China continues beyond February then there will be an impact on manufacturing (for appliances) in India,” says Nandi.

 

 

Key components like flat panels for LCD and LED TVs, printed circuit boards for smartphones and compressors used in ACs and refrigerators arelargely imported from China. Data sourced from department of commerce show, in 2018-19 Rs 50,554 crore  of telecom equipment and accessories were imported from China, out of which Rs 33,600 worth of handset components were imported. During the eight months — April to November 2019 — total import of telecom equipment stood at Rs 28,140 crore. During April-November, while Rs 4,200 crore worth of TV parts were shipped in, import value of fully-finished TV sets stood at Rs 1,750 crore. For AC parts, the import stood at Rs 1,820 crore.

In the past five years, while localisation of production for these items has improved with new manufacturing facilities coming up– local manufacturers’ dependence on China for components continue. 

“Makers of mobile handsets, currently the largest category by sales value among all consumer electronic items, are immune to any immediate threat,” says industry watchers.

According to Faisal Kawoosa, lead analyst at TechArc: “Large stock pileup during the second half of 2019 will help players. Vendors are now stuck with 13 million unsold units as sales remained muted compared to shipments.”

 During 2019, among 158 million units of smartphones were shipped in and only 145 million were sold.

(With inputs from Neha Alawadhi)