The electronics industry is concerned about escalating raw material costs and supply chain disruptions triggered by the ongoing impact of the Iran War, even as Iran and the US came to a temporary ceasefire agreement earlier this morning.
Sources have told NDTV Profit that electronics manufacturers are worried about how the war has dramatically altered the logistical landscape, with export lead times to major markets such as the United States or Europe rising significantly.
These export lead times have increased from a standard 45 days to a whopping 70 days, which has forced companies to manage longer inventory cycles.
This is coupled with the weakening of the rupee, thus creating dual pressure on the sector's financial health. These shocks are becoming increasingly difficult for manufacturers to absorb internally.
What is perhaps exacerbating this problem is that the price volatility is hitting every segment of the manufacturing process, be it core components or basic consumables. Essential parts such as the chipsets have already seen a price uptick of 15-20%, while general consumables like grease and packaging materials have seen a 45% hike.
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The volatility is sharper in chemical and resin segments, with organic chemicals and hardeners experiencing a glut in supply alongside price surges ranging between 40-70%.
Specifically, the cost of epoxy resins has climbed from Rs 300 to Rs 400 per kilogram, while the prices for critical inputs like plastic resins and helium have effectively doubled.
In a bid to mitigate these mounting inflationary pressures, the industry has formally flagged the need for government intervention, specifically requesting a zero-duty regime on critical inputs such as plastic materials, liquified natural gas, and various key metals.
Manufacturers argue that such tax relief is essential to offset the combined impact of the weakening currency and the unprecedented rise in overheads.
However, the industry warns that if these costs continue to rise unabated, the total cost burden will inevitably be passed on to the end consumer, leading to higher retail prices for electronic goods across the board.
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