Electronics Inventory is Piling Up

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Consumer electronics and smartphone makers have determined to extend their production cuts till August and defer plans for ramping up output for the festive season by a month, as demand continues to be repressed. Company executives said the production of mobile phones, televisions, refrigerators and washing machines is at 75% to 85% of original targets as inventory has piled up with consumers holding back their discretionary spending due to overall inflation. This is the first time in the last five years that the industry has cut production for such a long stretch, stretching from April-May.

“Production is cut by 20-25% over the original plan and these cuts will continue till August since inventory has piled up. Festive production will be postponed by a month,” said Godrej Appliances business head Kamal Nandi. A senior executive with one of the country’s largest electronic goods contract manufacturers said brands have become extremely cautious and continue to curtail production of smartphones, televisions and lighting products. Most companies are now planning their production every month depending on inventory levels.

The electronics industry usually begins festive season production by early August but will do it in September this year. The festive season, starting from Onam in Kerala in end-August and continuing till Diwali, is the country’s largest shopping period accounting for 35-40% of annual sales. Haier India president Satish NS said the company is running factories at bare minimum capacity. He said the worst affected are entry-level products where the consumer segment is badly impacted due to inflation. “We expect a pickup in sales from August due to Onam and Independence Day sales. There is sufficient inventory for these days. We will first start with festive production of the mid-and premium range which is not much affected.”

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Mobile phone market researcher Counterpoint Technology research director Tarun Pathak said consumers are holding on to their existing devices. “While footfall in stores has come down, it has gone up in service centres with people preferring to repair their existing handsets instead of buying new ones. Demand is likely to improve around the festive season,” he said.

Top executives at consumer goods makers have flagged inflation as a concern for demand and the overall Indian economy, though they are optimistic there will be a recovery from the end of the July-September quarter driven by a good monsoon, higher Agri income, effect of the recent cooling down of food and commodity inflation, and improvement in macroeconomic indicators.


 

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