Troubles may mount for Indian smartphone vendors and you can blame China
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It’s going to be a lot tougher to buy smartphones in India around the festive season beginning October, a time when Indians buy the maximum, fancy gadgets included.
The reason is really very simple, plain economics-a demand-supply mismatch. There is, as of now a glaring shortage of mobile components in China, the country which sells the maximum number of smartphones in India, through companies like Xiaomi, LeEco, Huawei, Oppo, etc.
Many Chinese manufacturing units in China have shut shops due to new technology, which requires more investment and hiring labour at higher rates.
The display panel shortage comes as some of the panel makers, especially for the LCD displays which are largely used in the low-end smartphones and make up for majority of the smartphones sold in India, have shut shop recently, while others have not had significant increase in capacity.
This is further aggravated by the fact that consumers are moving towards larger screens, 5″+ and especially at 5.5″, so there are fewer glass panels are coming out from the same capacity.
Even though top Chinese handset and component makers mulled over investing around $3 billion in India, the country is still dependent on the Dragon nation.
Some of the key components such as screen displays, 3G SOCs and flash memory will be short in supply, hitting the production plans of many vendors in the Indian market.
“Even though top Chinese handset and component makers mulled over investing around $3 billion in India, the country is still dependent on the Dragon nation.”
“This is likely to impact local Indian vendors, the small ones as well as the heavy weights, more than it will impact the global vendors such as Samsung or Apple, who have a more secure supply chain, and Chinese vendors such as OPPO, vivo, Lenovo, Xiaomi and Huawei, who are able to secure better deals due to the large volumes they can commit,” said Kiranjeet Kaur, Research Manager Mobile Phones IDC Asia/Pacific.
“The local country vendors have a disadvantage in this case. This shortage could also possibly lead to longer time to market and increased costs, and some of the costs may eventually get passed on to the consumers,” she added.
It is noteworthy that Chinese companies such as Techno, Gionee, Coolpad, Holitech, Wingtech, Camera King, Galaxy Core, Poxiao, Vivo and Sprocomm, which took part in ‘China-India Mobile Phone & Component Manufacturing Summit’, explored avenues to tap the existing and emerging opportunities.
“Going by the encouraging response of Chinese companies and definitive joint collaboration talks between the Indian and Chinese mobile and handset manufacturers, Chinese investment of $2-$3 billion (roughly Rs. 13,360 crores – Rs. 20,040 crores) over the next two years looks like a real possibility along with employment for one-two lakh people” Pankaj Mohindroo, national president, Indian Cellular Association (ICA), had said.
However, IDC expects the Indian smartphone market to still pick up in Q2 of this year, with further gains coming in Q3.
Jaipal Singh, Market Analyst Mobile Phones IDC India, said, “China-based vendors have extended their retail presence in the larger part of India and getting the shelf space along with the Indian vendors. Even as some of the eTailers are focusing more on profitability, which could mean lesser discounts this season, we believe the China-based vendors with presence in retail and push from the eTailers will drive the market this year.”
The China-based vendors had 24% share in the Indian smartphone market in 2016 Q1, up from 12% a year ago. Almost two-thirds of their sales takes place through the online channels.
Questions & Answers
Q.What is causing the smartphone supply shortage in India?
What is causing the smartphone supply shortage in India?
There is a significant shortage of mobile components in China, primarily display panels. Some Chinese manufacturing units have closed due to new technology requiring more investment, and others haven't increased capacity. Consumers also prefer larger screens, which further reduces output from existing capacity.
Q.Which types of vendors will be most affected by this shortage?
Which types of vendors will be most affected by this shortage?
Local Indian vendors, both small and large, will be more impacted than global vendors like Samsung or Apple, who have secure supply chains. Chinese vendors like OPPO and Xiaomi are also better positioned due to the large volumes they can commit, securing better deals.
Q.How might this supply shortage affect consumers?
How might this supply shortage affect consumers?
The shortage could lead to increased costs for vendors and longer times for new products to reach the market. It is possible that some of these increased costs will eventually be passed on to consumers.
Q.Despite the supply issues, what is the outlook for the Indian smartphone market?
Despite the supply issues, what is the outlook for the Indian smartphone market?
IDC expects the Indian smartphone market to grow in the second and third quarters of this year. China-based vendors, with their expanded retail presence and e-tailer support, are anticipated to drive the market this year, despite some e-tailers focusing on profitability over discounts.
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