Smartphone and television makers are cutting production after festive sales fell short of expectations. Brands plan to reduce output by 20% over the next few months to clear excess stock. High memory chip costs pushed prices up, hurting demand. Pradeep Jain said, "Smartphone production is going to come down by 20%."
Smartphone and television makers are scaling back production after a festive sales slump has left sellers stuck with excess unsold stock, extending the pain of a weak year into the industry's biggest selling season.
Production is likely to be up to 20% below planned levels over the next two-three months, following a decline of about 25% year-on-year so far in sales volume in this festive season, according to leading brands and contract manufacturers.
Surging memory chip costs have pushed up smartphone prices by 35-40% and television prices by 20-25% on average, severely denting demand in the entry-to-mid-range segment, which accounts for the lion's share of the market.
Industry executives said memory prices have increased two to three times in the past 10 months as demand, led by the AI sector, outstrips supply.
"Smartphone production is going to come down by 20%," said Pradeep Jain, managing director at Jaina Group, a contract manufacturer. He expects some recovery next year as consumers eventually replace their devices despite higher prices.
The festive season setback follows a decline of more than 10% year-on-year in smartphone and television unit sales in January-September, executives said. The festive season, spanning Onam to Diwali, accounts for nearly 30% of annual sales for both categories.
Two other large electronics contract manufacturers said brands had informed them about production cuts in both smartphones and televisions to clear excess channel inventory amid weak demand.
"Even though most companies had built festive inventory conservatively, no one expected festive sales for memory products such as televisions to be impacted so badly," said Haier India chief executive Satish NS. Industry-wide television unit sales have fallen 15% from last year's festive season, requiring production adjustments, according to him. Prices of printed circuit boards containing memory chips for 32-43-inch televisions have doubled to $80 this year, with vendors projecting a further surge to $110 by January or February, he said. Sony India managing director Sunil Nayyar said the market was under stress, with sales failing to match last year's levels even in terms of value despite price increases. "We have grown in the 65-inch plus large screen, but the pressure is in the 55 inches and below segment," he said.
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