Expect Another Soar In Phone Prices Post Lockdown, Hints IDC
At the start of April 2020, most smartphone manufacturers passed on GST hike to consumers by announcing a price hike. However, the market research agency expects a further increase in smartphone prices in India after the lockdown saga ends. IDC in its report cites a shortage of components supply and currency fluctuation.
Government of India hiked GST from 12%-18% for the current financial year which led to smartphone price increase in the country.
Navkendar Singh, research director at IDC India believes that the smartphone growth will be under stress in the next few quarters. He believes revival will only commence sometime in third quarter of 2020.
“Brands will be under immense pressure to find growth this year and will increase prices. The demand will continue to decline for a few quarters as consumers spend on essentials than buying phones. Revival will only start by end Q3’20 during festive times,” Navkendar Singh, research director, IDC India said in an interview.
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As the economy slows down due to coronavirus, he believes discretionary spending will go down resulting in lower retail walk-ins, which will impact overall revenues for the brands in FY20-21.
Customer switching to newer phones will be slower. He also expects the average selling price (ASP) of the phones to go up.
“This can lead to prolonged replacement cycles, price increase by the brands a weaker than expected consumer demand throughout 2020.ASP’s will remain between US$155-165 with fewer upgraders in 2020, with no major upside or downside expected.”
The research agency estimates a price hike due to factory lockdowns in China and the resultant supply shortage of the manufacturing components. IDC expects supplies to normalise by May.
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“This will result in a severe supply shortage of key components required to manufacture the mobile phones in India and should be expected to revive not before the end of 2Q’20 or early 3Q’20,” Singh told ET.
According to IDC estimates, the Indian phone market to register a downslide up to 20-25% in 2020. The agency expects e-commerce platforms to be really aggressive with their marketing and delivery expansion post epidemic lockdown.
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“The last 4 months of the year will see huge marketing blitz across price points and channels. Of course, this is under the assumption that we see recovery by September timeframe, just in time for festival season kicks in,” Singh said.