The CE and appliance markets in Australia is in for a soft landing with Australia set to escape the same downturn problems other Countries are facing.
While Supply is set to be a problem initially as the China supply chain moves to handle challenges including slumping demand and staffing chaos caused by Beijing’s abrupt U-turn on COVID controls analysts are confident that retail sales will remain “consistent”.
Apple, Samsung, and several large PC companies have already cut back orders as rising interest rates and inflation impact markets.
Here at CES analysts are predicting that Australia “will come out of the downturn better than most other Countries”.
Economists are also bullish that the Australian dollar will start to stabilise after an erratic year that saw the currency slump to pandemic lows.
Currently trading at $0.68 to the US dollar thirty-four economists recently surveyed projected that the Australian dollar will hold at US70¢ through to the end of the year, according to Bloomberg.
It’s expected to hit US70¢ by the June quarter.
Observers claim that retail sector is entering 2023 with bloated cash registers after a Christmas spending binge and Boxing Day sales which saw JB Hi Fi and The Good Guys sales surge. At Harvey Norman it was a case of getting rid of ageing stock and excess inventory with the likes of Bing Lee and Narta members reporting “Good strong sales”.
Now there is concern about what 2023 will deliver with all major appliance and CE retailers predicting soft sales with share listed stores fighting to control inventory.
Several interest rates rises and an expected hike by the Reserve Bank in February is frightening many consumers who face significant mortgage pressure, higher household energy bills resulting in the brakes being applied to spending in 2023.
The $24bn splashed over the recent holiday period is being viewed by many economists and analysts as the last of the big spending surges.
For some retailers, the new economic conditions are set to decimate earnings of specialist audio and appliance retailers as consumers put off spending on renovations or new Hi-Fi gear.
For the CE and appliance industry supply is set to be a problem in the first two quarters as China faces new COVID battles.
Late last week Apple advised IC and component suppliers for the iPhone 14 series to defer or even delay component builds until the middle of the first quarter of 2023, according to industry sources.
CE Retailers in Australia are already out of stock of several Apple products with several still running promotions in an effort to get rid of ageing stock before new 2023 products revealed.
Nikki Asia analysts claim, “Apple has alerted us to lower orders for almost all product lines actually since the quarter ending December, partly because the demand is not that strong,” a manager at an Apple supplier said.
“The supply chain in China is still trying to cope with the latest abrupt policy turns, which brought a shortage of laborers because of the sharp COVID surges.”
That policy change came in early December when China started to dismantle the world’s most stringent COVID regime, which included mass testing and quarantines, to kick-start the flagging economy.
According to Nikki Asia, Tech manufacturers initially welcomed the turnaround after years of fighting to maintain operations under the strict COVID measures. But now they face the challenge of embracing a new normal of rising infections and looser controls.
“It’s very chaotic,” an executive at an electronic component maker that supplies Samsung, Apple and as well as Motorola with smartphone components.
“The new wave of COVID surges spread super-fast, and most companies found it already makes no sense to quarantine their employees.”
Foxconn’s complex in Zhengzhou, is the world’s biggest iPhone manufacturer suffered a Labor shortage following a COVID outbreak in late October. Now it is offering bonuses of up to 14,000 yuan ($2,013) and asking employees to refer more recruits.
Other manufacturers in the tech supply chain, including Jabil in Chengdu, Pagatron in Shanghai, and LY iTech in Shenzhen, also raised wages and bonuses for workers earlier this month after a large number of workers quit amid COVID outbreaks or left early for the Chinese New Year holiday, which starts on Jan. 20.
“Most of us hope the surge of COVID waves will peak around February, and could gradually return to normal starting in March,” a manager with SMIC, China’s top chipmaker was quoted recently.
“We experienced a very dark time back at the start of December, when almost half of our team and suppliers suddenly got COVID and there was maybe less than 50% of people still coming into the plant … but now people are gradually getting used to the infection, and things are gradually improving.”
“The electronics supply chain is still at the stage of digesting excessive inventories rather than starting to churn out massive components, but the bottom of the downturn will hopefully come in the first quarter of 2023,” Cheng said.
“It’s actually a good sign that China is heading to reopen its doors,” he added. “There must be a lot of disruption in the short term, but in the coming quarters, [the reopening] could be good to stimulate the economy and could pave ways for a recovery.”
