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Will China lock-downs disrupt Supply-chain for Indian Manufacturers?

China lock-downs
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China is again battling with Coronavirus, and its major manufacturing hubs, one after another, are being locked down to curb the spread of virus. Companies manufacturing electronic components to touch panels to printed circuit boards, have all halted production in the locked down provinces. As a result, potential supply chain issues can be foreseen for the Indian manufacturers of smartphones and wearable. This couldn’t have come at a worse time for Indian companies when they are already grappling with supply-chain disruptions caused by the Russia-Ukraine war.

To sense the pulse of the Indian manufacturers about these supply-chain issues, DeviceNext interacted with leading Indian manufacturers, Gizmore and WeCool to know their opinions. Here is the excerpt of the interaction where Mr.  Sanjay Kalirona, CEO and Co-founder Gizmore and Mr. Sreenath P.G., General Manager at WeCool shared their views.

How do you see the China lock-downs will impact the Indian markets?

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Sanjay Kalirona: “China continues to face economic disruptions due to the resurgence of the Omicron variant of COVID-19. There is a complete lockdown imposed in some parts of the country and that is impacting the supply chains. We have received no shipment for the last 15 days, even though the orders had been placed in advance. Things have started to move now but we believe that the impact of this disruption will remain for the next 15 to 20 days. Most companies keep a stock of up to 30 days and thus it has not adversely impacted the Indian market as yet. It is only by the end of the month that brands and consumers will start feeling the pinch.”

Sreenath P.G.: “The supply chain usually has a buffer stock that can cover for 1 -2 weeks. But if there is a delay of more than 3 weeks, definitely there will be a huge impact on the Indian market. Currently, the goods in transit will cover April and partial consumption of May, but if the delay in the arrival of goods continues, then the goods will run out of stock for the coming months and that would be a matter of concern. The supply chain is very important and we count on it for the majority of our stock. Yes, there will be a huge impact on the market and it will survive by the domestic supply chain. There would be a problem in meeting the supply and demand of the market. Nevertheless, the prices of the products are going to skyrocket and the margin will be less.”

Can’t the domestic supply-chain address the demand gap?

Sanjay Kalirona: “The “Made in India” is growing by leaps and bounds but the ecosystem is still evolving. We have still reached that stage where we are self-sufficient in regards to every product of every component. There will be no impact on products such as accessories, cables, chargers, etc., as they are now 100% Made In India. The same cannot be said for fitness accessories, smartwatches, headphones, neckbands et al. The lockdown has been partially lifted and we believe that the movement of goods should start in the coming week. The delay should not exceed 20 days. Overall, the impact of the current lockdown will be short-term and not long-lasting.”

Sreenath P.G.: “Currently, we are facing delays for 1 -2 weeks but if lockdown goes for a longer time it will take more time to reach products to our warehouse. This might lead to huge losses because we will not be able to restock and meet the demand. There are many small-scale companies in India who are going to face huge supply chain disruption if the lockdown scenario is going to extend in China as they are depend on Chinese vendors for their products.”

According to you what would be the segments or device categories that will be majorly impacted by these disruptions?

Sanjay Kalirona: “In general, the supply chain for mobile phones and smartphones will be affected. Additionally, brands and vendors may run out of stock for fitness and audio products. At this juncture, it seems that the impact will not be major.”

Sreenath P.G.: “Due to lockdown in China, the electronics category will be majorly hit and up to 25% of production could get hit in the short term because Indian electronic device makers import a large chunk of parts from China.”

Mr.Arjun Bajaaj – Director, Videotex International Group

The cost of raw materials such as HIPS, ABS, copper, and so on has been steadily growing. In addition, the Russia-Ukraine issue has put a pressure on the global economy, and the Indian Rupee has taken a hit, with its value falling to its lowest level in years. While there is enough stock and shipments on the way to endure for 1-1.5 months, the new lockdown enforced in Shenzhen for 1-2 weeks will undoubtedly create a delay in our product supply. If the lockdown is extended, the industry will suffer the consequences, with supply chain disruption creating production slowdown and the end-product being delayed, all because of India’s reliance on China for raw materials. As per the given scenario, prices for consumer durables such as televisions and washing machines may rise in the next months as a result of rising raw material prices, higher freight charges, the ongoing conflict and its implications, and the ongoing war’s rippling effect. We might expect a 7-10% increase in television costs.”

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