Electronics Makers Switch to Cheaper Materials Amid Rising Commodity Costs

The electronics industry is grappling with rising commodity costs, prompting manufacturers to adopt cost-saving measures such as material substitution and localisation. Copper prices have surged by around 45% year-on-year, while memory prices have doubled or tripled due to strong demand from AI data centres. To mitigate these costs, companies are turning to aluminium as a cheaper alternative for copper in products like air-conditioners, refrigerators, and fans.

LG Electronics India has localised a major resin used in plastic-moulded components, while Blue Star's managing director B Thiagarajan notes that the industry's double-digit margins have 'crashed to single digits' due to rising input prices. Companies like Crompton Greaves Consumer Electricals and Voltas are also expanding their value-engineering drives, which involve substituting expensive materials with cheaper equivalents and reducing material usage.

Industry executives estimate that this substitution can lead to savings of 2-6% of a product's final manufacturing cost. The rising costs have led electronics companies to raise prices by 10-12% in three rounds since the beginning of 2026, while absorbing another 7-10% to protect demand.