Analysts slash smartphone shipment outlook for second time this year

Smartphone market tracking firms have started cutting their 2021 shipment estimates for the second time this year, with import curbs at airports and ports in China adding to the woes of brands already plagued by the continuing acute shortage of chipsets.

While TechArc has cut its projections by 7% more, IDC said the industry is staring at a further 5-10% drop in shipments. In May, market trackers had sharply cut their shipment growth estimates to either flat or just 1% growth on year from an average 16% expansion forecast earlier, due to the effects of the pandemic.

With China closing or imposing curbs at airports and ports due to Covid infections among workers, freight costs have increased by 40-50% — having almost doubled in the past three months — which will lead to higher mobile phone prices going forward. China accounts for 60-70% of components used in electronic goods made in India.

Analysts say the shortfall in shipments could impact sales during the upcoming festive season which is crucial for the industry as it makes up almost a third of its annual sales. “We were expecting sales of 152-155 million smartphones for 2021. However, with ongoing supply chain issues, we expect brands falling short of 5-15% in meeting their targets for the year,” said TechArc founder Faisal Kawoosa. “This would translate roughly to a 7% revision for our sales projections. On the cost side, prices should go up 3-5% depending on the brand, its volumes and other factors.”

He said brands, especially those catering to the mass segments or 90% of the market, could see almost a 15% shortfall in shipments in the lead up to the festive season.

‘Semiconductor Shortage may Continue till 2022’
“If it (logistic challenges) continues in September, we are staring at a 5-10% drop in shipment of handsets,” said Navkendar Singh, research director, IDC.

IDC so far expects to see single-digit growth in 2021.

The developments in China come just as the handset industry was seeing a strong recovery in demand after the second wave of Covid. Canalys analyst Sanyam Chaurasia backed IDC and TechArc’s grim outlook.

“Yes, that (China port shutdown) will have an impact in the short run. India’s macro-economic crunches are still not over, and it will recover slowly as the manufacturing sector recovers, so this will continue till the end of Q3,” he added. However, Chaurasia hasn’t yet revised his single-digit growth outlook for 2021.

ET has learnt that analysts tracking smartphones have reached out to brands, original equipment makers (OEMs) and component makers asking them for their revised estimates.

“The supply chain issue will impact all smartphone players. Typically, brands stock up on their inventory a couple of months before the sale season starts, but this time we also have the component shortage to deal with,” said a senior executive in one of the top three handset makers.

The global semiconductor shortage has already impacted electronics, smartphones and auto industry and, according to experts, it could continue until 2022, leading to increase in prices and supply chain shortages.

The shortage comes with some expecting consumer demand to improve further as the pandemic impact wears down and the economy reopens fully.

Industry Body Stays Optimistic
“The logistics issue, so far, looks to be temporary with a setback to supply by 1-2 weeks. This means it could affect the already pent-up demand towards the end of September and the demand will shift even more to the traditionally strong pre-Diwali and Diwali sale months of October and November,” said Neil Shah, research analyst and partner at Counterpoint Research.

Industry body ICEA also remains optimistic that handset brands will be able to meet the increasing demand, especially in the crucial festive season.

“We are confident that the mobile phone industry will meet customer and demand expectations in the festive season. We do see a marginal challenge in the availability of IT products,” said ICEA chairman Pankaj Mohindroo. Mydroll