China COVID crisis: Worried over supply chain disruptions, consumer durable makers stocking up on inventories

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Due to the increasing COVID cases in China, consumer durable makers are stocking up on raw materials to deal with contingencies

New Delhi: Worried over soaring COVID-19 cases in China, consumer durable makers are stocking up on raw materials to deal with contingencies in case their global supply chains are disrupted again.

With Chinese New Year holidays starting from the third week of January, if the factories there are not able to resume full production in February when they open due to the COVID situation worsening, the Indian industry may once again face supply chain issues, experts said.

The consumer durable makers normally maintain inventory for about a month, but they are now increasing it to cover at least 2-3 months.

Any possible disruption may impact categories such as air conditioners and LED TV panels, where a high proportion of components are sourced from China.

Leading electronics manufacturing firm Dixon Technologies said it is keeping its fingers crossed over the situation in China.

“Till now the supply chain (from China) is fine and not impacted. Our suppliers are assuring us about delivering on time but we are keeping our fingers crossed and putting everything under the lens,” Dixon Technologies Vice Chairman and Managing Director Atul Lall told PTI.

Asked about the Chinese New Year holidays, Lall said this factor has already been factored in. “That is fine. The concern is more about the pandemic,” he added.

Godrej Appliances Business Head and Executive Vice President Kamal Nandi said in the last couple of years, the appliances industry has reduced its dependence on China for sourcing components.

“But still there are some categories like air-conditioning, where the dependence on China is very high. Close to 40 to 45 per of components of an air-conditioner (by value) comes from China. Compressors form a big part in that,” he said.

If the COVID situation worsens post the Chinese New Year holidays, then it would be a matter of concern, he added.

“If they dispatch after the new year holidays, we will not get it by March. Most of the components are in transit… but if post-New Year holidays, challenges of Covid continue and operations (of factories there) could not start in full swing, then we will see challenges in the June quarter, specifically in categories like air-conditioner,” said Nandi. “We are very watchful as of now.”

If the supplies are disrupted, then the impact will be felt from April when air-conditioner sales start picking up.

Super Plastronics Pvt Ltd (SPPL), which has licenses for international brands like Blaupunkt, Thomson, Kodak and White-Westinghouse for the Indian market, said the situation in China is “quite unpredictable”.

“This is impacting the industry as everyone has pressed the panic button, which can result in the excess purchase of raw materials, which can influence artificial price hikes which have been seen in past. This can lead to a sale crash globally as sentiments are low right now,” said SPPL CEO Avneet Singh Marwah.

He added that if things do not improve in the next two weeks, shipping time can extend up to 90-100 days for some products.

According to Consumer Electronics and Appliances Manufacturers Association (CEAMA), things are in a state of “flux” and everyone is chasing suppliers for getting components delivered on time.

From January 20, the Chinese New Year will start and then supply will resume from the first week of February.

CEAMA President Eric Braganza said the industry is still dependent on China for some key components, ranging from compressors to motors.

“It will vary from company to company as to which one is sourcing from India or importing,” he said. “Most of the manufacturers would be chasing their suppliers in China to get their material dispatched before the Chinese New Year, which will help them to take care of their February production.”

However, CEAMA is “optimistic about good growth in 2023 as well” and expects the industry size to almost double to Rs 1.48 lakh crore by 2025.

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