Chinese Smartphone Brands Pushing to Stay Afloat as India Goes into Lockdown
On March 24, Indian Prime Minister Narendra Modi announced a 21-day lockdown to curb the spread of the COVID-19 epidemic that officially started on April 25. All shops, commercial establishments, factories, workshops, offices, markets and places of worship in India were ordered to close, operation of interstate buses and subways and construction activities is also suspended.
The second-largest smartphone market after China, India is also an important overseas destination for many Chinese mobile phone manufacturers. Chinese brands currently command 60% of the Indian mobile phone market with Xiaomi, Vivo, OPPO and Realme in the lead.
As competition in China’s domestic market intensifies, local phone manufacturers are scrounging to find new opportunities for growth. India, with its massive and largely price-sensitive population, has turned into a perfect destination for Chinese brands specializing in affordable Android-based handsets. According to statistics from Canalys, the Indian market accounted for 11% of Samsung’s overall shipments in 2019. For Chinese brands, the numbers have been more significant, with 34% of Xiaomi’s shipments, 13% of OPPO’s and 23% of Vivo’s coming from the South Asian country.
According to Canalys data, in 2019, the shipment volume of the Indian mobile phone market increased by 8% year-on-year to 148 million units. Xiaomi ranked first with a market share of 29%, Vivo – third with a market share of 17%, while OPPO and Realme ranked fourth and fifth, respectively. Data from Counterpoint also indicates that Shenzhen-based OnePlus accounted for one-third of India’s high-end mobile phone market in 2019 becoming India’s number one high-end mobile phone brand.
Sadly, with the lockdown taking a toll on the normal operations of various industries, smartphone production and sales are also starting to stagnate. Counterpoint Research predicts that the lockdown will reduce mobile phone shipments in India by nearly 60%.
To make things worse, just a few days before the lockdown announcement, India also rolled out tax revisions, increasing the GTS tax rate for mobile phones in the Indian market from 12% to 18%, an almost 50% increase. To protect their already very thin margins, companies like Xiaomi were forced to immediately hike up the prices for their products.
Canalys analyst Jia Mo told 21Tech that in addition to the increase in GST tax rate, the recent depreciation of the Indian rupee against the US dollar has also been an important factor prompting an increase in smartphone prices. Canalys currently estimates that in the worst-case scenario, the Indian smartphone market will decline by 4.2% this year. In the best-case scenario, however, it has a chance to increase by 3.2% year-on-year.
OPPO India’s General Manager Elvis Zhou noted in an interview with Tencent News that since the income of a large portion of India’s population has been affected by the COVID-19 lockdown, customers are more likely to allocate their financial resources on purchasing only the most necessary items, which is especially true for customers with a consumption capacity of less than 1,000 yuan a month.
According to the Indian lockdown order, only companies providing necessary services or operating vital facilities are allowed to keep operating, which includes food stores, banks, hospitals and police departments. All other enterprises were forced to suspend operations, and people urged to stay at home. All major e-commerce platforms had to clear up their catalogs, leaving only the most necessary items in place.
According to the Indian business media The Economic Times, mobile phone manufacturers, including Xiaomi and Realme, have made a request to the Indian government, hoping to list mobile phones as “important items”, which would allow companies to deliver handsets to users through e-commerce channels.
The Indian Association of Information Technology Manufacturers and the Indian Cellular and Electronics Association also wrote to the government seeking an exemption for the distribution of electronic devices such as smartphones and removing shipping restrictions on domestic transportation and export of parts. However, it is still unknown whether or not the government will entertain these requests. It is also unclear if these measures could help phone-makers recuperate their sales at a time when the spending ability of the big part of India’s population is at its lowest.
“Current demand for electronic products is basically gone. All our business in India is at a standstill,” a Chinese smartphone dealer in India told 21Tech.
However, there is still a glimpse of hope. ““In line with directives of the Government of India, OPPO India has resumed manufacturing operations at the Greater Noida facility from 8th May onwards, with 30% workforce capacity,” an OPPO India spokesperson told Pandaily. “ Additionally, we have also started sales of mobile phones through Amazon, Flipkart and retail stores in permitted areas. We will also distribute face masks (free of cost) to our employees and their family members. These are being made locally at our manufacturing plant in Greater Noida and OPPO has become the first smartphone brand in India to produce masks locally for the community.”
“Keeping in view the social distancing norms for the safety of our consumers and to support the retail community, we have also introduced contactless service for consumers across purchase, delivery, and after-sales service levels. This would further help our retail partners expand their channels and provide the required impetus to the Indian smartphone market. We are hopeful that the smartphone industry will pick pace in the coming months as we emerge stronger from COVID-19,” commented OPPO India.