Second Covid wave hit smartphone market back in March when curbs were few

Shipments declined 14% QoQ in Jan-Mar, as per IDC data

The second Covid wave that is causing unprecedented disruptions across India, may have come as a surprise for many but the latest data from IDC shows it had begun to impact smartphone business on the ground as early as March. In March, when no Covid-related curbs were in place, growing inventory levels across channels led to a 14 percent sequential decline in quarterly shipments.

Since lockdowns were withdrawn and local curbs were lifted last October, shipment of smartphones rose steadily to a record 45 million units in October-December quarter. With the launch of the vaccination drive in January, the momentum continued and the market grew rapidly till mid-February.

Even though the reported number of Covid cases remained low and the government declared victory on the pandemic, activities at both, online and offline channels, suffered during the second half of the quarter. “While the vaccine rollout programme at the beginning of the year instilled positive sentiments, the onset of the second wave of Covid-19 infections towards the end of the quarter resulted in subdued consumer demand. Thus, the inventory cycle which had shrunk earlier in the second half of 2020, started to get longer since the middle of the January-March 2021 quarter,” market research firm IDC said.

Further, IDC’s report indicates a shift in consumer buying pattern in the quarter that grew increasingly skewed towards the premium segment. During the quarter, while shipments grew 18 per cent year-on-year on a low base, the growth was primarily driven by premium and luxury segments, indicating some stress in the mass market. According to IDC, the premium segment (above Rs 37,000) grew by a staggering 143 percent in January-March as sales of flagship devices like iPhone 11 and 12 grew rapidly. While, shipment of feature phones that usually costs less than Rs 2,000, declined 8 percent.

In fact, the economic fallout of the second wave was beginning to impact buyers in the affordable and mass markets. In the March quarter, leading player Xiaomi, for instance, registered a meagre three per cent YoY growth on a low base. While third and fifth largest players Vivo and Realme registered 3 and 4 percent decline, respectively.

With an imminent threat of a third Covid wave now looming, analysts at IDC predict the market to slow down further in the April-June quarter and impact the growth prospects for the year.

"The recovery in 2021 might not be as smooth as expected earlier, with uncertainty around the lasting impact of the second wave and a possible third wave in next few months. We expect a rebound in consumer sentiments in the second half, resulting in a single-digit growth annually. However, the degree of growth will be restricted due to reduced discretionary spending, supply constraints, and anticipated price hikes in components in upcoming quarters”, said Navkendar Singh, research director, IDC India.