Supply Crunch Means Indians Are Paying More For Affordable TVs

The government restricted imports of television panels amid border tension with China as part of Prime Minister Narendra Modi’s self-reliance pitch during the pandemic. The component that contributes roughly 60% of the total cost of manufacturing a television is largely imported with little domestic production.

The restrictions are causing delay in clearance, Avneet Singh Marwah, director and chief executive officer at Super Plastronics Pvt., a brand licensee for Kodak and Thomson, told BloombergQuint in an emailed response. "The import time cycle has increased by 7-10 days.”

Moreover, many small manufacturers of LED panels exited the business in China, Jaipal Singh, associate research manager of client devices at IDC India, said. But global demand for LED screens increased as people remained stuck at home due to the pandemic, causing the panel and TV prices to rise.

A senior executive at a contract manufacturer told BloombergQuint on the condition of anonymity out of business concerns that vendors in China stopped producing 32- and 43-inch TV panels as it was not margin lucrative. Bigger TV screen panels and mobile screen panels offer better margins compared to smaller-sized TV panels, the person said.

TCL, Vu, Xiaomi, Thomson and Kodak are among the brands that sell affordable televisions in India. Their models are up to 40-50% cheaper than comparable models from larger brands. For example, a 32-inch Samsung smart TV is priced at Rs 21,400 at electronics stores, while a 32-inch TCL smart TV costs Rs 14,490.

Affordable TV brands typically work with gross margins in the range of 12-15%, while premium brands' gross margins are in the range of 25-30%, according to the executive cited earlier. Xiaomi, according to its spokesperson, is known to sell all its products on a 5% profit margin.

Besides low margins, these companies keep the prices low by sourcing from low-cost suppliers in China, the person quoted earlier said.

Reduced supply from China meant cheaper brands have had issues with importing open cells into the country, the executive quoted earlier said. The problem is more pronounced in televisions of 43 inches and below, the person said.

Xiaomi declined to comment on shortage, while TLC and Vu didn’t respond to BloombergQuint’s emailed queries.

Ritesh Ghosal, chief marketing officer at Tata Group’s electronics retail chain Croma, told BloombergQuint that while premium brands managed to import TV panels, low-cost firms had a problem because of their margin structure. Buyers had to settle for costlier models. As a result, Ghosal said, Croma sales by value rose but volumes suffered.

Vijay Sales also saw volumes fall 20-25% during the festive season, but its sales by value were on a par with last year’s. There was limited supply of affordable brands which has improved post Diwali, Nilesh Gupta, managing director of Vijay Sales, told BloombergQuint, adding that customers were forced to opt for higher-priced brands. In the last four to five months, he said, the price of affordable TVs have increased 8-12%.

While smaller, affordable televisions are available on Amazon and Flipkart, the two online retailers didn’t respond to BloombergQuint’s queries on the shortage.

Kodak and Thomson faced shortage of panels, prompting a hike in prices.

“During the pandemic, there has been a lot of pent-up demand. The panel manufacturers have taken this as an opportunity. Currently, panels are being manufactured only in ‘one’ country as there is no alternative,” Marwah said. Panel have turned 100-150% costlier depending on the screen size, he said, adding the price of a Kodak 32-inch smart TV increased from Rs 10,999 to Rs 12,999.

Super Plastronics, also a licensee for Thomson, said in a separate email that even Thomson has been facing supply issues in the last six months as there’s no alternative in the world and “we’re dependent on China”. Thomson increased the price of its 43-inch TV from Rs 19,999 to Rs 23,999.

“As per panel manufacturers, prices will continue to increase till Q2 2021,” Marwah said. “Many top brands have decided to burn huge on small sizes and they might not increase prices. They want to take up the market share of Indian manufactures.”