Indian smartphone industry stares at $2 bn loss due to coronavirus lockdown

Smartphone industry in India could take a $2 billion hit on account of the coronavirus pandemic as shipments declined significantly in the months of March and April compared to the previous year, according to Counterpoint Research.

Noting that the effect of the pandemic on India was relatively mild until mid-March, Counterpoint Research said the outbreak is spreading pan-India and the country has been put under a lockdown.

This is expected to result in a decline of 3 per cent in smartphone shipment in 2020 to 153 million units compared to 158 million units last year, it said.

"We are estimating a year-on-year decline of 27 per cent in March shipments, and almost 60 per cent for April assuming lockdown will be until April 14. This translates into a revenue loss of about $2 billion for the industry till the lockdown period," Counterpoint Research Associate Director Tarun Pathak told PTI.

Pathak further said that if the lockdown extends, the loss will be higher and could affect "the entire supply chain and the channels in terms of revenue, payments as well."

Moreover, consumer demand is also expected to get an adverse impact as people focus on saving and therefore, limit discretionary purchases for some time, he noted.

The first quarter of the year had seen smartphone makers struggle on account of component supply being disrupted in China following the coronavirus outbreak. The outbreak, whose epicentre was in Wuhan, in China, has spread across the world and claimed thousands of lives.

Counterpoint

With increasing number of people testing positive in India for the infection, the government announced a nationwide lockdown on March 24 - halting everything including transportation and manufacturing activities.

Pathak said demand for smartphones is expected to shift to the second half of the year. "Even if the situation stabilises by mid-year, people may hold their purchase until the festive season," he said.

Online sales have taken a major hit as smartphones did not feature in the "essential" category that has been allowed to be delivered by e-commerce route. Once the situation returns to normal, one can expect a strong online activity as these channels will look to wooing buyers with offers.

"Handset makers will also look to provide attractive promotions with extended pay out returns, sell-out support, attractive interest rates to offline players and at the same time, try to make stocks available quickly to online and leveraged more to fill the huge gap left if situation is under control soon," Pathak explained.

As far as production is concerned, both domestic and exports will have almost full 20 days of impact.

"Factories with their export base in India are likely to be impacted more," Pathak said.

However, factories are likely to refrain from any layoffs during these times as they would want to step up production as soon as the situation improves, he added.