Covid-19: Mobile phone makers face ₹6,000-cr production impact by April

Nandana James Mumbai | Updated on March 12, 2020

The India Cellular & Electronics Association has sought the help of the Centre and the RBI to tide over the immediate impact   -  Mohammed_Yousuf

Supply chain may be hit though Chinese factories are slowly re-starting

Mobile phone manufacturers could see an impact on production value to the tune of ₹6,000 crore by April due to the disruption in the supply chain following the coronavirus epidemic. Most of the components used for manufacturing a phone comes from China. Although production facilities in China are limping back to normalcy, the last 10 days have been tough for Indian manufacturers.

“We estimate that March and April will get affected to the extent of 15-20 per cent of volume and by next month-end things should be back to normal. The impact in terms of production value will be ₹2,500-3500 crore in March and ₹2,000-2,500 crore in April. The hardest hit will be the Indian brands and second-tier sub-assembly component manufacturers,” Pankaj Mohindroo – Chairman, India Cellular & Electronics Association (ICEA), said in a letter dated March 6, addressed to the Ministry of Electronics & IT (MeitY).

Except for Hubei and Wenzhou (Chongqing Province), all regions and zones have now been downgraded to low-risk. Almost all factories have reopened, especially in the crucial Shenzhen/ Guangzhou area and are reporting labour availability of between 15 per cent and 50 per cent, according to ICEA.

“This is indeed good news and if this trend continues, China should be back to almost normal by (the) end of April. We estimate production shortfall of not more than 10-15 per cent in China up to end of March provided the same trend continues,” it further stated. The industry body has sought the help of the Centre and the Reserve Bank of India to tide over immediate impact.

“The capital goods despatched from China and even Korea and Japan is getting delayed. In many cases, there are Commencement of Production Dates (COD). Surely, these dates will get breached in many cases. Therefore, the RBI should favourably extend the COD norms by four to six months immediately,” ICEA said.

Extension of sunset

Many special economic zone (SEZ) units were in the process of importing capital goods to meet the sunset deadline of March 31, it said. “Surely, this dateline cannot be met. Therefore, an extension of the sunset date by at least six months is necessary,” it added.

Mohindroo told BusinessLine that the situation can get quite precarious. “For example, even if one component/sub-assembly/part, out of say 200 components, is not available, the entire production can come to a halt. Therefore, in spite of a substantial improvement in manufacturing revival in China, the situation remains quite precarious.”

The letter also stated that there is a requirement of technologists and trainers, primarily from China and Korea. “We have to create a window immediately for key personnel to be able to travel to India wherein they are assisting in setting up/maintenance of manufacturing facilities. All due precautions, (for) example, appropriate medical testing certificates, screening at arrival etc. will be ensured. Case-to-case basis approval duly vetted by industry body/relevant Ministry (MeitY) will be given,” it explained.

Published on March 12, 2020

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