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Slim hope of recovery during 2020 for smartphone business

Though supply chain could resume after a short disruption, weakening demand to hit the Smartphone sales prospects in India throughout calendar year 2020.
Faisal Kawoosa of techARC makes a qualitative  assessment of Covid-19 impact on smartphone market in India:
March 31 2020: Covid-19 is an extraordinary situation. There can be no qualitative deterministic measurement of the impact done in this situation. The reason is there are so many uncertainties around and the situation is impacting both the supply and the demand side of the market.
Some of the uncertainties :

  • When can supply chain resume in China as well as in India?
  • When can online and offline channel resume in India?
  • Who will buy a smartphone at this moment when the shopping is confined to critical things – groceries and medicines?
  • What will happen to the employment scenario and the overall economic outlook of the country over next couple of quarters?
  • Can we have the new academic session for higher studies in normal mode, which typically sees increase in smartphone sales?
  • Can the festive season revive the market sentiments? Typical there is additional dispensable income by way of bonuses, etc., paid around that period. Will companies have money to pay bonuses? In first instance, will they make profits?
  • Who will still buy a smartphone if the income and economic outlook looks grim? What will be that percentage?
  • Finally, can we expect things to get better towards the end of the year, when experts are fearing comeback of the viral infection?

These are some of the major questions that cannot be answered at this juncture, and hence attempting any estimation of the impact in numbers would be injustice with the industry and the OEMs and other players in the value chain. The situation is undoubtedly difficult and every brand will be impacted. Even brands would not be in denial on this. However, attributing a definite number is speculative and would further hurt the sentiments of the entire industry.
Keeping in this view, techARC has taken a conscious call of not sharing any quantitative guidance about the market and hence prepared a qualitative outlook of the industry basis certain assumptions, enumerated below:-

  • Globally, countries like China and Korea have resumed in 8-10 weeks, though not at full scale. We expect supply chain to resume in June 2020 in India. Thus April and May will be the worst affected months in terms of shipments, be it out of China or in India.
  • The lockdown has just begun. Consumers will not spend beyond food and medicines for several months going forward. We expect April to August consumers to carry such sentiments. Only those requiring a Smartphone in case of breakdown will be the primary buyers. The elective upgrades and replacements will be at minimal.
  • Supply including the channels (Offline as well as online) should be back to normal in September. This will be fundamentally triggered by ground-up to festive season.
  • Even Oct-Dec quarter will be attempt revival of demand on account of festive season sentiments, the macro-economic scenario by then as well as threat factor of the viral infection resurfacing towards the winter will keep the demand lukewarm. Only if, there would be a vaccination available by then at mass scale, the market could see revival, but not at the normal levels.

The smartphone industry shall have to look at other revenues, especially service oriented to offset the gap which will arise due to low sales of Smartphones in 2020. Some brands like Apple, Samsung, Xiaomi, Realme, OPPO, Nokia HMD and Lava have already set up services on top of the active user base. They need to further look for more paying services to narrow the gap between the potential earnings through sale of hardware and the actual revenues they can realise in 2020.