‘Covid-induced supply crunch, weak rupee could make smartphones in sub-Rs 15,000 range costlier’

Many fear that the rapidly rising caseload could severely dent India’s economic recovery, which would have an adverse impact on consumer sentiment.

A second and more virulent wave of Covid, which threatens to disrupt supply lines of smartphone manufacturers, coupled with a weak rupee could force companies in 2021 to raise handset prices in order to protect margins. Research firm, Canalys said such a scenario could impact the sub-$200, or roughly Rs 15,000, bracket that accounted for more than 80% of sales last year.

“Canalys expects smartphone shipments in India to plunge in Q2 2021 due to the second wave of Covid-19. As geographical distribution of cases varies widely, a nationwide lockdown seems unlikely. But regional lockdowns could hamper transport of raw materials and devices due to limited inter-state travel,” Canalys analyst Sanyam Chaurasia said.

For smartphone brands and channels, building up optimum inventory could prove to be a hurdle in the second half of 2021, he added.

Another analyst at Canalys, Varun Kanan said that looking further into 2021, unfavourable macroeconomic factors will lead to a rise in the average selling price (ASP) of smartphones.

“A combination of ongoing supply crunch on key imported components and a weaker rupee will make it increasingly difficult for vendors to maintain margins at current price levels. Consumers will bear the brunt of this cost, which will hit particularly hard in the sub-$200 smartphone segment, which accounted for 81% of the market last year,” he added.

The rupee on Wednesday rose 30 paise to close at 74.35 against the US dollar. Analysts and economists have already pointed out that the second and more lethal wave of Covid-19 has already started to impact the movement of people and goods. Many fear that the rapidly rising caseload could severely dent India’s economic recovery, which would have an adverse impact on consumer sentiment.

Overall in Q1 2021, Indian smartphone shipments grew 11% Y-o-Y to 37.1 million units, as favourable macroeconomic factors helped smartphone vendors capitalise on the growing importance of smartphones for remote education for Generation Z and for work and leisure for Millennials.

Xiaomi retained its position as the market leader accounting for 28% share followed by Samsung whose market share fell to 19% from 21% in the previous quarter. Vivo came third, followed by Oppo and Realme.

In the premium segment, Apple had a stellar performance in a traditionally a soft quarter. “Following a strong festival quarter, it shipped over a million iPhones in Q1, with demand for iPhone 12 supported by local assembly and attractive finance offers, as well as sustained demand for the older iPhone 11. But the market-wide celebration will be short lived, as a resurgence of Covid-19 in India in Q2 will derail momentum,” Chaurasia said.