Coronavirus outbreak creates scarcity of white goods in India; market highly dependent on China, S Korea for key components

The coronavirus outbreak is slowly creating a scarcity of white goods in India. Being highly dependent on markets like China and South Korea for the supply of key electronic goods and product components, India is seeing the number of goods shrinking even as prices rise. Customers rushing to purchase air conditioners or refrigerators ahead of the onset of summer may be in for a disappointment. Either their favourite product may be out of stock or priced 10-15 percent higher. “We are in constant communication with manufacturing units in China and South Korea. The situation is not under control and is a cause for worry because the inventory may last only till the first week of May,” the head of a large consumer electronics retailer said. Coronovirus Disease 2019, or Covid-19, originated in Wuhan, China. South Korea, which is home to leading electronic majors like Samsung and LG, is now the second-largest country after China to be affected by the deadly outbreak. Why is COVID-19 a concern for India? China, which is the epicentre of the outbreak, is a major exporter, accounting for almost 23 percent of global electronic goods. Among products, mobile phone supplies could see a hit the hardest as manufacturers are left with only one month of stock. Apple recently announced it will likely fall short of this quarter’s sales target due to the coronavirus epidemic. [caption id=“attachment_8082831” align=“alignleft” width=“380”]  Representational image[/caption] Arjun Bajaj, Founder of Shinco India (a brand by Videotex International), said manufacturers who import components and panels from China were prepared for the Chinese Lunar New Year vacation gap. “But with the Chinese government extending the vacation, there is a lot of chaos in the Indian market with regard to the delay in factory openings.” Apart from mobile phones, home appliances like refrigerators, air conditioners (ACs) and televisions may be impacted. When it comes to TVs, the open cell panel, a key component, is imported from markets like China. With production in China almost shut, export of this component has been halted, which has impacted production of TVs in India. For ACs and refrigerators, air compressor is the key component, which aids in cooling. This part is also imported from China. Since a major part of AC and refrigerator sales occur between February and April, shortage of products or its key components will directly impact revenue. “Chinese workers are unwilling to work and manufacturers are not ready to take risk. While we are adequately stocked, our inventory will only suffice for a limited time period. This, in turn, will cause a humongous delay in shipments and disrupt the production plans of consumer goods and mobile industry,” Bajaj added. On February 22, Samsung Electronics said a coronavirus case had been confirmed at its mobile device factory complex, located in South Korea’s Gumi, causing a shutdown of its entire facility till February 24. https://youtu.be/n3y2Th4q1WA Meanwhile, LG Electronics has asked workers in Daegu (South Korea), which has seen a spike in cases, to work from home. Prices rise Prices of electronic appliances in India have risen by 10-15 percent due to disruption in the supply of crucial spare parts from China. Appliance makers in India expect a 5-10 percent increase in product prices as demand rises ahead of the onset of summer. Customers may feel the pinch immediately as companies grapple with the delay in securing spares from China. Due to the epidemic, component exports from China has been halted indefinitely. Disruption in the supply chain comes just ahead of the onset of summer when Indian consumers start to buy appliances such as refrigerators and ACs. The earlier an appliance is bought, the cheaper it is. With the absence of key components to produce goods, there would be delays in production and a mismatch in demand and supply. With customers rushing to buy cooling products to beat the heat, appliance makers are struggling to meet demand. To offset this, a price hike is expected over the next few weeks. Importing a finished product is expensive since the government has imposed a 20 percent import duty on completely built units. With imports to mitigate the dearth of products being ruled out temporarily, a price rise is the only option.