According to the International Data Corporation (IDC), smartphone brands are most likely to further increase prices in India, once the lockdown ends due to shortage in supply of components and currency fluctuation.
Further, the report added that prices have already been hiked due to the goods and services tax (GST) increase from 12 per cent-18 percent.
IDC highlighted that the demand for smartphones will continue to decline for a few quarters as consumers will be spending on essentials rather than buying phones. Revival will only start by end third quarter (Q3) 2020 during festive times. This can lead to prolonged replacement cycles, price increase by the brands and a weaker than expected consumer demand throughout 2020.
Further, it added that the demand slowdown will impact replacement buying, which generally helps in average selling price (ASP) growth. ASPs will remain between $155 – $165 with fewer upgraders in 2020 and no major upside or downside expected.
IDC estimates a significant impact due to the component supply issues in second quarter (Q2) 2020. Most of the factories in China are resuming operations and will gradually ramp up the capacity in end April 2020 or early May 2020.
Additionally, restrictions and cautiousness around transportation within India and prioritising medical equipment, essentials etc. over parts of phone components will add to this shortage of components coming into India and reaching manufacturing plants. This is set to result in a severe supply shortage of key components required to manufacture mobile phones in India and should be expected to revive not before the end of Q2 2020 or early Q3 2020, IDC said.
As per IDC estimates, India’s overall handset market is expected to decline by 20 per cent -25 per cent in 2020, while smartphone and feature phone categories could decline by up to 5 per cent and 40 per cent, respectively, due to the COVID-19 outbreak.
Further, IDC also expects e-commerce channel to go aggressive in terms of marketing and investments around delivery, considering that the cautiousness around retail walk-ins will persist for next few quarters.
IDC expects the India mobile phone market to follow a U-shaped curve from the Q3 2020. The pent-up demand from the first half of the year will gradually shift to the second half, rolling over to first half (H1) 2021 as well.
As per IDC, the channel ecosystem especially the e-tailers should focus on contactless and sanitised product delivery which can have long term impact on consumers opting for online purchases as against offline.