Second Covid-19 wave may erase gains in smartphone market, like the first

In spite of 23% growth in shipments, yearly business may get another jolt

The smartphone market in India has recorded an impressive 23 per cent year-on-year growth in the January-March quarter in anticipation of a steady recovery in coming months. But the resurging Covid wave may spoil the market dynamics in April-June quarter, just like it did last time.

After shipping a record number of smartphones in July-September and October-December periods, handset companies were on a ride. With consumers performing all crucial tasks like banking to studying online, demand for additional screens jumped manifold since the lockdown in 2020 – taking smartphone demand at a new high.

Recovery in economic activities and declining Covid cases further raised market sentiments in 2021 – pushing brands towards procuring ever higher numbers of devices. At 38 million units, this time the shipment is highest ever for the January-March period, analyst firm Counterpoint Research noted in its latest report.

“Continuing with its stellar run, India’s smartphone market registered a third consecutive quarter of record shipments in the first quarter of 2021, riding on pent-up demand. consumer confidence also increased due to the beginning of a vaccination drive in the country”, said Prachis Singh, analyst at Counterpoint.

While the record shipments reflects the prevailing mood at the time, the exponential rise in Covid cases in the country has turned the tide since. Redisposition of lockdowns and restrictions at major metros and key districts across the country has brought the offline business at its knees.

According to All India Mobile Retailers Association, lockdown in Maharashtra alone has left its 15,000 retailers high and dry. Another industry body Retailers Association of India has pegged the overall all loss in business of non-essential goods in India at 45 per cent in April.

According to Singh from Counterpoint, the superior growth in the March quarter might not sustain in the coming days. “These (March quarter) numbers should be taken with caution as a second and more virulent wave of Covid-19 is currently on in the country. That is likely to impact the coming quarters. The consumer demand will take a hit due to the ongoing Covid-19 wave and subsequent lockdowns,” he said.

Various estimates suggest, handset makers could be hit by a loss of business amounting to 5-10 million smartphones in the current quarter. With average selling price of smartphones hovering around Rs 11,500, their total loss may range between Rs 5,700 and Rs 11,500 crore.

Last year’s numbers show, the impact of lockdown measures could be devastating on the handset market. In April-June quarter, the market had shrunk by 51 percent to 18 million units. Ever since, Chinese companies have been bearing the impact of the pandemic – with all four leading players losing share in the local market.

After two years of subdued sales, in January IDC had predicted the local market to grow by up to 21 per cent in 2021.

However, market experts are now weary of the fact that like last time the impact of lockdowns do not drag the numbers for the entire year. In 2020, the smartphone market declined for the first time, by 4 percent, as loss from the June quarter could not be compensated for.