Lower discounts, lesser offers on smartphones likely this year amid supply shortages

Smartphone consumers are likely to see lesser discounts and offers this year due to a gradual rise in prices of key components including semiconductors, display, memory etc. which have eaten into the margins of brands, say industry watchers.

Analysts said that price cuts will also be scarce this year as companies are unlikely to have high inventories given disturbance in supplies. They added that the smartphone industry – riding on record demand since the festive period of 2020 – is currently watching for any impact of the renewed surge in Covid infections, with offline retailers in Mumbai already flagging slowing sales in March.

“Typically, mid-level smartphones are sold at 5-7% margins by brands whereas it can range between 15-20% for premium devices,” said Tarun Pathak, research director at Counterpoint. “But, because there has been cost escalation in critical components, which brands are absorbing at large sell-in margins have come down restricting their ability to slash prices.”

He added that price cuts will also be scarce this year as companies are unlikely to have high inventories given disturbance in supplies. Phone companies normally run flash sales every month at discounted prices and offer massive price drops in the festive quarter, which is unlikely to be the case this year.

India’s apex handset body ICEA said that suppliers of domestic phone makers like Lava, Micromax, Karbonn etc. have cut supplies by almost 97% to prioritize volume brands.

Besides this, in the immediate term phone shoppers may also face longer wait time for their order fulfilment.

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Although supply situation from countries like China and Taiwan is improving for the smartphone industry, the fear of Covid second wave and regional lockdowns in India are a cause of worry for both manufacturers and offline retailers, analysts said.

“There is definitely fear of slipping into previous year’s situation,” said Faisal Kawoosa, founder and chief analyst at research firm TechArc. “However, I feel it might not be like last year as we have a ‘rule book’ to follow. Having that said, if the situation worsens it will impact sales in offline as well as manufacturing of smartphones.”

As for mom-and-pop retailers, March has been the toughest month so far.

“Due to restrictions across Maharashtra, two out of five stores are open on average, and consequently, sales have dropped by almost 60%,” said Vibhooti Prasad, president, Mumbai mobile retailers’ welfare association.

“Consumers are cutting down on discretionary spends due to rumours of an upcoming second wave and another year of job losses,” he added.

Nilesh Gupta, founder and managing partner, Vijay Sales, admitted to some fears around the Covid resurgence, but said that he doesn’t expect absolute lockdowns. “…we are not foreseeing a dip in sales because of that.”

Navkender Singh, research director at IDC India said that only a pan-India lockdown could upturn smartphone demand. “But State wise lockdowns will make a marginal impact especially when online deliveries are being allowed.”

After a huge dent to demand due to Covid induced lockdowns, smartphone demand had picked up in the festive season which led to record shipments in the second half of 2020. In fact, brands had shipped record 54.3 million smartphones during last year’s festive quarter.

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Top brands Xiaomi, Samsung, Vivo, Oppo and Realme did not respond to ET’s query seeking comment.



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