At the presentation of its results, Xiaomi’s chairman warned that a price increase could take place. The shortage of components, which affects all electronics, would drive up the cost of manufacturing. And part of that increase will be passed on to the amount of smartphones.
Xiaomi Mi 11
There are simple principles in economics. The best known is the “law of the market”: supply and demand. If demand is high, the price goes up, because the producer is in a strong position. If the offer is plethora, the price goes down because the buyer competes. It’s simple. We have known since the end of 2020 that shortages on electronic components will continue. They affect THE PS5 and Xbox Series X game consoles, AMD and Nvidia graphics cards and… smartphones. Qualcomm has confirmed that the difficulties will extend until at least the end of 2021.
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All the major electronics brands seem to be affected by this shortage, even Apple with its iPhone 12. Xiaomi, for example, will be hit this year, a news outlet reconfirmed by the brand’s president, Wang Xiang,during a financial conference call attended by the Reuters news agency. During this meeting, Xiaomi presented its results for the fourth quarter of 2020 (good results, for that matter). Xiaomi and Realme were among the brands that denounced a shortage at Qualcomm.
Xiaomi will pass on the increase in component costs
Wang Xiang explains that the shortage of components logically increases their purchase price. “We will continue to optimize the costs of our products,” he said. “We will do our best to offer the best prices to our consumers. However, we may have to pass on the increased costs to our customers depending on the situation.” The leader here uses the conditional. But this is a readjustment that we believe will be inevitable.
It remains to be seen whether this adjustment will affect only future models of the brand’s smartphones, such as the Mi 11 Ultra and the Mi 11 Pro, which we expect in the spring, or whether the models already launched, such as the Mi 11, the Redmi Note 10 or the Poco X3 Pro and F3, will also be impacted. The latter already have a recommended public price. However, this rate is not fixed over time. Usually, it gradually declines until the end of the product’s commercial life. But faced with a complicated supply, it could go up.
Source: Reuters
