Coronavirus Effect: Smartphone players are unable to gauge the full impact of lockdowns and global recession and there is going to be a sharp contraction as consumers are in no mood to spend on buying new devices and rather focus on stocking essential items like groceries and other daily needs.
The smartphone production in India is already set to decrease by nearly 40 per cent amid nationwide lockdown as factories are shut and there are no online sales either.
According to Counterpoint Research, they have looked at parallels from recent recessions to help guide their forecast.
“Our conclusion is that we expect to see a sharp contraction as consumers withhold making discretionary purchases during periods of maximum uncertainty. The result is an extension in the replacement cycle,” said Peter Richardson, Research Director, Counterpoint.
“However, we expect that extension will be limited to no more than six months,” he added.
There is a visible impact to new devices being launched in India as the components sourced from China are still impacted while factories resume operation slowly and cautiously in that country.
The negative impact from the supply chain side will last until the end of Q2 minimum.
The bigger worry, however, is the disruption of the global supply-chain that is set to impact the manufacturing — from smartphones to consumer electronics.
“We further expect that the long run average market growth rate will not vary significantly – but the near term growth rates will reflect the slowdown and then rebound — a similar pattern to that seen in recent recessions but allowing for the different level of market maturity,” explained Richardson.
While smartphone manufacturing has picked up in India over the past few years, the country is still dependent on China to a large extent for supplies of components.
The COVID-19 lockdown has also forced smartphone players to postpone new launches for an indefinite period as online retailers have prioritized their operations and services keeping the essential services in mind.
It makes sense for the original equipment manufacturers (OEMs) to defer new smartphone launches but, at the same time, support retailers who have been hit strongly, according to Tarun Pathak, Associate Director, Counterpoint Research.
Pathak said, “It has to be a collaborative effort from the government to original equipment manufacturers (OEMs) and other players in the ecosystem to support the partners involved”.