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Pandemic-induced curbs, parts shortage drain smartphones

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New Delhi: Smartphone brands are reeling under a double whammy from covid-induced restrictions hitting sales and brands being forced to increase prices by 10-15%, while a depreciating rupee and shortage of key phone parts jacked up the total bill of materials (BOM) for handset brands, industry executives said.

Market leader Xiaomi Corp. said a price hike was ‘inevitable’ and Samsung,

, Oppo and Realme are likely to pass on certain cost burdens to the consumers as the shortage is now spreading to other components beyond chipsets and displays, leaving little room for further absorption by brands.

ET reported in September last year that the cost of display panels for handsets has almost doubled in the global market due to sudden outburst in demand for phones. But most recently, memory chipsets are seeing 20% increase in cost, battery packs prices have risen by 10% and others, including camera modules and sensors, are also costlier by 5%, industry experts said.

“While we have tried to absorb the increasing costs, with the dollar appreciating, we foresee an inevitable increase in smartphone prices in the coming days,” a Xiaomi spokesperson told The Economic Times. “Despite these changes, we at Mi India continue on our promise of keeping less than 5% of profit margin on every smartphone sold in India.”

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Domestic brands Lava and Micromax said that entry-level, budget smartphones and feature phones would be the worst hit, where the percentage contribution of components in shortage to overall BOM is highest and margins relatively lower.
The below Rs 15,000-price segment accounts for 80% of overall smartphones sales in India.

Tejinder Singh, head of product at Lava International, said that there has been an “unprecedented” increase in BOM cost of smartphones lately. Cost of components like chipset, LCD driver IC chips which are in severe shortage have gone up by 20-100%, varying by suppliers.

“Brands have been increasing smartphone prices by 5-7% and absorbing the rest increase for the time being. Recently dollar has also increased to Rs 74.5-75 levels, which is an additional challenge for the brands,” Singh said. But innovations in product design helped Lava to control the cost and pass on a minimal hike of 4-5%, he added.

“While we are assessing the situation closely and it’s difficult to ascertain the exact impact, we are in for India and will ensure that a minimum burden is passed on to the consumers,” said Micromax co-founder Rahul Sharma.

Fast-growing smartphone company Realme said while some brands have been passing on the price hikes to customers, Realme is still evaluating the situation.

Samsung, Vivo and Oppo did not respond to ET’s query till press time.

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