This would continue till the time the ongoing global supply situation normalizes.
Slightly higher pricing for smartphones is here to stay for a while, Xiaomi India Chief Operating Officer Muralikrishnan B told Financial Express Online on Wednesday, adding that this would continue till the time the ongoing global supply situation normalizes.
“Over the last 12-18 months, there has been a lot of challenge from a supply chain perspective. Not just chipsets, there’s been shortage of components and increase in international freight rates as well,” Muralikrishnan said.
“All of this has placed an upwards pressure on overall prices of devices,” he added.
Drawing attention to the overall smartphone market in India and how it was witnessing near double digit percentage increase in overall average selling price, Muralikrishnan said that it was “apparent that this price increase will continue until the supply situation stabilizes.”
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Factors like pent-up demand, COVID-19-induced slowdowns, and sanctions against some key Chinese technology companies have contributed to a global shortage of chipsets. The cost of battery packs, camera modules and display panels have also shot up by as much as 10 percent depending on the vendor, according to various reports.
Xiaomi president Wang Xiang had warned in March that the company wasn’t immune to the ongoing supply chain shortages and that even though it was “looking okay” it was “feeling pressure.” It may eventually have to “pass part of the cost increase to the consumer in different cases,” Xiang had told investors during an earnings call.
“The reality is, there is pressure on pricing. But as a company, we’ve always believed in honest pricing. We try and retain our net hardware margin at a maximum cap of 5%,” Muralikrishnan added.
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Taking the example of the newly launched Redmi Note 11T 5G, the top Xiaomi India executive said despite all challenges, it was able to price the phone quite aggressively considering everything that it put into it, hardware-wise, and that it was a “very effective price proposition” compared to rival offerings.
5G is an added cost to devices like these and some of the affordable 5G phones—including the Redmi Note 11T 5G—launched recently have made it abundantly clear that there is a certain ‘5G tax’ that is involved that companies need to factor in while …….