Electronics Giants Swap Copper for Aluminum Amidst Cost Surge

Electronics producers are adapting to significant cost increases by innovating material choices and enhancing local manufacturing. Aluminum is now favored over copper in products such as refrigerators and air conditioners, as commodity prices surge due to the West Asia crisis and AI infrastructure demands. Companies have implemented price increases, but are also absorbing some costs and optimizing product designs to minimize expenditures. Input prices have severely impacted margins, which have fallen from double digits to single digits, making it challenging to pass the full cost increase to consumers. Copper prices have dramatically risen, with supplies also facing uncertainty due to advance bookings for AI data centers and electric vehicles. Material substitution and product redesigns can achieve savings of 2-6% on manufacturing costs. For instance, producing 500,000 ACs, which cost around ₹700 crore last year, now requires approximately ₹940 crore. Companies like LG Electronics India are actively localizing components and engaging in value engineering to reduce per-unit costs without compromising quality. Electronics companies have raised prices of major appliances by 10-12% since the beginning of 2026, absorbing an additional 7-10% to protect demand. Memory-intensive products have seen sharper increases of 20-40%. PG Electroplast plans to start local AC compressor production by December-January, adding capacity for two million units.