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Television and smartphone companies cut production by 30%

Manufacturers of consumer electronics including smartphones, appliances and televisions have cut production by up to 30% since the start of November compared to a year earlier, as demand slowed after Diwali and sales of entry-level products remained muted during the festive season, prompting a slump for stockpiling.

This is the second time this year that companies have resorted to cutting production. Industry executives said that after the first cut during the April-July period, production returned to normal and even grew year-on-year in the run-up to the holiday season in August to early October.

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For smartphones, market researcher Counterpoint estimates there was a 35% year-on-year decline in sales in November, with the entry-level segment seeing a sharp drop of more than 50%. For home appliances and electronics, the annual decline in sales was 15-20% last month, according to industry estimates.

‚ÄúCompanies are cutting production due to the sharp drop in demand after Diwali, and the entry-level segment has been the hardest hit. For example, 32-inch TV used to contribute 50% of total sales last year but has now dropped to 35%. Pradeep Jain said, Managing director of the Jaina Group, which makes smartphones and electronics for several brands besides retailing its Karbonn brand, “The story is the same for mobile phones.”

LG Electronics India Vice President Deepak Bansal said market sentiment was weak due to inflation, layoffs in the tech sector and fear of a slowdown affecting earnings. This has forced the industry to cut production, he said, but a recovery is expected early next year as factors such as inflation may decline by then and seasonal sales increase.

Every year after Diwali demand becomes muted, but this year was the worst in 5-6 years, with even the biggest trading partners refusing to buy shares, industry executives said.

There was a sharp drop in sales in November with no new releases, said Tarun Pathak, director of research at Counterpoint Research. He said unsold inventory for the brands is close to eight weeks compared to the normal 4-5 weeks. “December will be a little better due to New Year’s sales, but again the next quarter will generally be very low. And that pressure will continue into the next quarter from April to June. As a result, brands are adjusting production.”

Satish NS, President, Haier India, said the focus is now more on producing summer products like air conditioners and deep freezers, less on other products. The company stopped production for 10 days after Diwali.