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Reopening Demand Set To Create New Supply Problems

Reopening demand on CE and appliance retailers, coupled with shipping and supply chain issues and concern over inflation due to retailers holding prices up due to stock issues are set to plague the industry running into the peak buying period according to analysts.

Marooned containers due to limited outbound freight to China have caused bottlenecks across supply chains and this is affecting supply to CE retailers. The problem is so bad according to Bloomberg that “It’s also prompting downgrades across analysts estimates for the upcoming earnings season” claim analysts with Apple one of the big Companies facing issues.

Prices for DRAM and NAND chips are peaking, and 12-month forward earnings estimates for chipmaking giants Samsung Electronics, Micron Technology and Intel have fluctuated or fallen in the past two months.

The next problem for Australian retailers is that few industry experts expect the supply snarls to end this year as an energy crisis in China affecting semiconductor, and raw material manufacturing and processing stokes inflation fears leading to a jump in costs of over 20% across CE, audio and appliances.

“The supply-chain problems are going to stay, leading to substantially higher prices, and major dislocations in parts of markets no one is expecting,” said George Ball, chairman of investment firm Sanders Morris Harris. “Almost all segments of the economy that are not pure service or pure technology driven will be struggling with supply-chain issues for a long time.”

One plus for Australian suppliers is that manufacturing hubs such as Malaysia are reopening with brands such as Dell, Sharp and Sony set to benefit.

Making matters worse are factory closures, Samsung lowered its sales forecast in late September due to shutdowns in Vietnam, where tens of thousands of workers are now leaving the factory heartland or have been forced into COVID lockdowns.

What’s making matters worse for margins is a supply crunch within the commodity sector, driving raw material costs even higher for businesses already dealing with logistics issues.

In some cases, suppliers are cutting deals with retailers, a supply price is set only for the supplier to be hit with additional costs which retailers are refusing to accept.

Several brands have told ChannelNews that “There will be big price rises” in the new year 2022.

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