Electronics firms to extend production cuts till August amid low demand

Consumer electronics inventory has piled up as consumers are holding back their discretionary spending, a report said

Amid subdued demand for smartphones and electronic products due to high inflation, manufacturers are now planning to extend their production cuts till August and defer plans to ramp up output for the festive season by a month, a report in the Economic Times said. 

The production of mobile phones, televisions, refrigerators, and washing machines is at 75 per cent to 85 per cent of original targets, company executives told ET, adding that inventory has piled up with consumers holding back their discretionary spending. 

This is the first time since 2017 that the electronics industry has cut production for such a long period of time, stretching from April-May.

Godrej Appliances business head Kamal Nandi told ET, "Production is cut by 20-25 per cent over the original plan and these cuts will continue till August since inventory has piled up. Festive production will be postponed by a month."

As consumers have cut down their spending amid soaring inflation, a top executive with one of India's largest electronic goods contract manufacturers said that brands have now ' extremely cautious and continue to curtail production of smartphones, televisions and lighting products,' ET quoted. Most firms are planning their production on a monthly basis, based on inventory levels, the senior leader said. 

Electronics firms start manufacturing for festive season demand by early August, however, this year the industry is planning to do so in September. India's festive season starts from Onam in Kerala and continues till Diwali, which is the nation's largest shopping period as it accounts for 35-40 per cent of annual sales. 

The sales of smartphones and televisions have been impacted from January-February this year. The demand for appliances cooled down from mid-May after record high temperatures drove sales of AC and refrigerators. 

Haier India is running factories at bare minimum capacity, said firm's president Satish NS, adding that the entry-level products are worst-hit, ET report said. 

He told ET, "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."

Most firms are selling products at discount to clear inventory and are not increasing rates even as Indian rupee continues to hit new lows. Top executives feel recovery will start from the end of July-September quarter due to monsoon, high agriculture income, and demand will pick up in the festive season the ET reported.