Supply, demand crisis hits Indian smartphone market in Q1 2022

A global supply crisis led by lockdowns in China, combined with a lack of demand driven by higher inflation and lack of innovation in smartphones, has led to a drop in shipment numbers for the Indian smartphone market in the first quarter of 2022. According to industry analysts and reports, the market will either remain flat or even decline in the first quarter of 2022. The constraints may also continue throughout the year.

“We’re estimating a 5% YoY decline in shipment numbers for Q1 2022. This could be the first time that the Indian smartphone market has seen such an annual decline in shipment numbers,” said Tarun Pathak, research director at Counterpoint Research India.

Pathak isn’t the only one estimating such a dip either. Navkendar Singh, research director at International Data Corporation (IDC), India, said that organic growth of smartphones “has stalled” for a while now, since consumers “no longer need new phones too often”. As a result, the demand issue could continue across the rest of the year as well, causing the overall industry growth to remain flat.

Further, a report by global research firm Canalys, published today, said that shipment growth in India slowed down in the January-March quarter of 2022, with only 2% growth year-on-year. The firm attributed this slowdown to the supply chain and logistics crises that have plagued electronics firms through 2021 and the better part of 2020.

According to Canalys, a total of 38 million devices were shipped through Q1 2022, which is a sharp fall from the usual trend of double-digit YoY growth in Q1 every year. The report said that four out of India’s top five smartphone sellers, including Chinese brands Xiaomi, Oppo and Vivo, and Samsung, saw a sharp drop in shipments in India.

“The start of the quarter saw India being hit by the omicron wave of the covid-19 pandemic. As demand started recovering towards the middle of the quarter, high logistical costs and a slowdown in China’s manufacturing sector due to a new covid-19 outbreak further pegged back the numbers,” Pathak explained. 

The high logistical costs include the cost of shipping of consignments from China to India, which has surged due to a lack of availability and higher oil prices. Pathak affirmed that while the cost of shipping per consignment between China and India was at around $1,000 in the pre-pandemic years, the same has shot up to around $6,000 today. “Alongside this rise, shipping wait times have increased 3x, adding to the supply crunch,” Pathak said.

Canalys data for Q1 2022 stated that Xiaomi, India’s largest smartphone vendor by market share, saw shipments decline 24% YoY to clock 8 million units. Samsung’s shipments declined by 2% YoY with 6.9 million devices shipped between January and March 2022. 

In fourth and fifth places, Vivo declined by 15% YoY with 5.7 million units, while Oppo declined by 13% YoY to ship 4.6 million devices. Realme was the only brand among the top five that registered growth.

IDC’s Singh further said that users are reducing their telecom expenses due to rising inflation – which in turn could lead them to decrease spending on upgrading phones.

That said, phone brands don’t seem too bothered by the dip. Manish Khatri, partner at Mahesh Telecom, said that despite higher supply chain and logistical costs, original equipment manufacturers (OEMs) have not withdrawn offers like no-interest equated monthly instalment (EMI) and buy now, pay later (BNPL) deals.

“The third quarter is typically the strongest for smartphone OEMs in India, and as this period approaches, most phone brands in the country should roll out their usual offers and increase the hype around existing promotions to ramp up the shipment numbers,” he said.

Sanyam Chaurasia, analyst at Canalys, said that the Indian smartphone market could start seeing signs of recovery from the next quarter. “Sell-in started to improve from March. Channel companies are optimistic about healthy sell-in in Q2 2022, with vendors preparing for a strong festive quarter. They are finding opportunities in the lower-tier cities and towns in India, where device penetration is still relatively low,” he added.

Sell-in refers to the acquisition of products from the manufacturer or its distributor by retailers, and is a key metric that indicates expectation of customer demand prior to a sale period.

Pathak noted that the large number of smartphone users India already has will eventually want to upgrade their devices, and hence the slump will be temporary.