The past two years have caused significant pressure on the electronics industry. There was a shortage of raw materials such as semiconductors and display panels along with price hikes and supply constraints in the same. Semiconductors alone saw a 40% increase in prices, and this has been an ongoing trend, month on month. A major reason behind this has also been the overstocking of goods by large electronics players due to which smaller players, in comparison, are suffering too.
All this has contributed to a 30% hike in the prices of goods in the consumer durables industry alone in the last 12 months. As per reports, this global constraint will continue till the end of 2022 as well, and hence, as an industry, we need to come up with a proper structure in place. So, companies and countries that are enjoying a monopolistic status should end it soon.
Adding to the woes of the industry has been the retraining of buyer sentiments. The second coronavirus pandemic also restricted the buying power of people since most had to spend much of their disposable income on healthcare, thus curbing discretionary spending. Overall, when we talk about the white goods industry, the SMART TV sector in particular actually witnessed a de-growth in 2021. Summer season products in 2021 saw major drawbacks due to second wave peaks during the same time.
When we talk about how we are going about dealing with these issues, yes- diversifying supply chains were a must do for companies like ours. Today, globally there are three major chipset manufacturers for SMART TVs in the world, and we are working with one of them. But in the near future we are expanding and by Q2 of 2022, we will have an alternative supplier as well.
The Government of India ended 2021 with a historic announcement of an investment of Rs 77,000 cr towards building the display panel and semiconductor sector in India. This had been an ask for a long time, by all electronics brands. Prior to this announcement, there have been other announcements such banning CBUs for ACs, refrigerators, TVs, which amped up manufacturing in a short span of time. However, to really bring this into effect India requires a thriving and intentioned raw material setup to complete the loop.
While it has been listed time and again, the myriad number of ways that this will enable the sector, most importantly, a manufacturing sector, as such, will put India well on track to its goal of becoming a USD 5 trillion economy. It has been proven that this sector is the backbone of any large economy. In addition to this, India already is the largest exporter of software across the globe and with a hardware industry in place, we will add yet another high yielding item to our export portfolio; and not to miss out on the opportunities that these industries can provide in terms of design intervention and innovation via backward integration. This will also enable Indian players to create highly custom products for our own market and offer better products at a greater value.
Now coming to the impact that will have on India’s own electronics industry- raw materials such as display panels and semiconductors make up for 70% of the costs of an electronic. Much of it is also owed to the logistics prices. An in-house set up in place will enable the consumer durables industry to work on offering products at better rates to its direct customer. Due to the carnage created by the shortage of supplies being faced by companies ever since 2021, has created space for another country to show up as an alternative. Players globally are scouring for other reliable partners to re-build this industry with and India will be a great bet for all.
These efforts will allow us to have better MSLs and will also go hand in hand to better the automobile sector in the country. Currently, India is the second biggest manufacturer of smartphones in the world and with consistent work, we will lead the SMART TV market as well.
For instance, when the government rightly banned CBUs of refrigerators and ACs and even brought the raw materials set up under the PLI scheme, we saw how compressor factories quickly cropped up to support the announcement. With the many industries that these initiatives will profit and help, job opportunities too will get a boost.
Talking about market size, the Indian TV industry is to grow 8-10% and the appliances industry is set to grow at 15-20%. In the next two years India will be the third biggest market for SMART TVs and the second biggest as a manufacturer too. And, if the policies remain stable then the domestic market will grow from 12 to 18 million sets in the next 3 years.
Avneet Singh Marwah, CEO at SPPL, Exclusive Brand Licensee of Blaupunkt in India