Covid-19 Impact May Set India’s Smartphone Production Back By Four Years

India’s share in global smartphone production is set to fall to the levels seen four years back, as factories have halted manufacturing activities due to the lockdown and demand is likely to stay weak till May-June, analysts said.

India’s contribution to global smartphone production had jumped to 16 percent in 2019 from 9 percent in 2016, as several handset makers cut down output in China or moved out due to the US-China trade war and received heavy incentives by the Indian government to beef up manufacturing in the country, according to a report by market intelligence firm Counterpoint Research.

However, 2020 could see India falling back to the 9 percent level as an unstable economy would hurt demand badly.

“Factories do have spare capacity and may cover up for lost exports by ramping up production. However, the India demand will be less as compared to our previous numbers and this will have an impact on total production,” Counterpoint associate director Tarun Pathak told ET.

The research firm has cut India’s 2020 smartphone production forecast by 7-8 percent from 300 million units predicted earlier.

China started losing lustre as the world’s smartphone factory in 2016 and its global contribution dipped from 75 percent to 68 percent in 2019. Samsung, in 2019, shut all its smartphone production in China when its share in that market fell below 1 percent. Apple is also gradually shifting production out of China, and increasing it in India, to take advantage of tariff benefits under the ‘Make in India’ policy, the Counterpoint report said.

However, China’s economy is moving back towards normalcy as the coronavirus outbreak is under control in that country, and smartphone factories are ramping up production aggressively. This while India is in the midst of a production shutdown, which may cost the industry Rs 15,000 crore, ET had reported earlier.

Also, demand for smartphones isn’t likely to pick up anytime soon. If the lockdown extends further, India’s global contribution growth could reverse in 2020, experts said.

“The Indian economy will be deeply disturbed as compared to China if the lockdown extends for a longer period and factories doubling their production is out of question now,” said Navkender Singh, the research director at International Data Corporation (IDC), India.

Handset brands Oppo and Vivo were expected to double their manufacturing capacity in India to 100 million and 50 million units, respectively, this year. Xiaomi had announced construction of its seventh India factory in 2019, saying that it would lift the brand’s total production to 60 million units in 2020.

―Business Journal