While the lockdown due to the COVID-19 pandemic has led to production loss of an estimated over Rs 15,000 crore for the Indian handset manufacturing industry, there will be no sharp decline in demand for mobile phones in a post-lockdown scenario, predicts industry body India Cellular and Electronics Association (ICEA).
The extension of the lockdown will “obviously” increase the loss for handset manufacturers, but this period has also helped people realise the value of mobile phones, said Pankaj Mohindroo, Chairman, ICEA.
However, revenues of smartphone makers will continue to take a hit as the government on Sunday decided not to open e-commerce channels for the sales of non-essential items like mobile phones from Monday as earlier announced.
Sales of mobile phones are now expected to resume after the end of the lockdown period on May 3.
“These are uncertain times. But it seems that people will make a beeline for smartphones (after the lockdown) because they saw in the lockdown that one could make an enterprise survive by merely having a smartphone. Education also shifted to smartphones,” Mohindroo told IANS in an interaction over phone.
“People realise the great value of it now. So we do not see demand going down too much,” he said.
The demand, ICEA predicts, will stay healthy for entry level and premium phones.
“The entry-level smartphones (under Rs 10,000) will be very well positioned. The feature phones will also have a very good market because people who do not have a mobile phone will now start buying one,” Mohindroo said.
However, mid-level phones may face challenges of demand. What has increased the woes for the industry is the increase in GST and fall of rupee against the dollar, he said.
Several smartphone manufacturers like Apple, Xiaomi, Realme and Vivo earlier this month announced their decision to increase prices of their devices in India due to the GST hike on mobile phones from 12 per cent to 18 per cent which became applicable from April 1.
According to ICEA, while the global companies will eventually be able to tide over the challenges that they are facing due to the uncertainties brought about by the coronavirus pandemic, it could be far more difficult for the Indian mobile phone manufacturers.
“The global companies have a fairly large share of the Indian market… Challenges will be very acute for Indian companies or the smaller manufacturers or component manufacturers,” Mohindroo said.
“The biggest concern is the cash flow. Down the road, the revenue may not be of normal level. Overheads are there. And if they have to produce with a smaller workforce, it will be a difficult one because your plants are configured for a certain capacity of operations. So very tough times,” he said.
What is causing a lot of stress to the industry is that the retail stores are not open due to the lockdown, he said.
However, “make in India” may get a boost in a post-lockdown scenario as “confidence in China has gone down tremendously” and major companies would like to shift their manufacturing base out of China, Mohindroo said.
With 158 million smartphone shipments in 2019, India surpassed the US to become the second-largest smartphone market globally after China, according to Counterpoint Research.