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Smartphone prices jumped 27% since COVID began in 2020: IDC

Smartphone prices jumped 27% since COVID began in 2020: IDC

Shortage of chipsets and components, supply chain disruptions forced companies to hike prices of smartphones across segments.

The worst is not over yet. For consumers, who are already grappling with ever-growing household budgets, may have to bear the burnt for a few more quarters at least. The worst is not over yet. For consumers, who are already grappling with ever-growing household budgets, may have to bear the burnt for a few more quarters at least.

The COVID-19 pandemic has impacted the global electronics supply chain, resulting in a massive jump in price of smartphones that have become an integral part of our daily lives. Average price of smartphones has increased by a record 27 per cent since the pandemic begun in March, 2020, data shows.

At the end of March, 2022 quarter the average selling price of smartphones in India stood at Rs 19,000 - up from Rs 15,100 at the same time two years ago, when cases started surging and forced the country into a lockdown. Data from International Data Corporation (IDC) shows average selling price of smartphones in India has increased steadily for over a year and is currently at its peak.

According to Navkendar Singh, Research Director at IDC India, multiple factors have worked against the sector in last two years. While initially, immediately after the pandemic emerged in China in January, 2020, lockdowns and shutting down of factories resulted in supply shortage and increase in prices of components. Later, severe shortage of semiconductors jacked up prices of chipsets by many times. Then request disruptions in ocean freights - earlier due to container shortages and now because of another lockdown in China - have resulted in an overall increase in cost of manufacturing by at least 20 per cent.

The overall inflation has also led manufacturers to move towards higher value products and shifting their focus away from affordable  (Rs 15,000-8,000) and mass market price points (below Rs 8,000). As cost of manufacturing go up, it has become unviable for most companies to maintain their wafer-thin margins by selling smartphones cheaper than Rs 10,000. Most smartphone brands usually operate at a meagre 2-4 per cent profit margin, which leaves very little room for them to absorb growing costs.

In fact, leading brands like Xiaomi, Samsung, Realme and Oppo, among others, hiked prices of their models immediately after launching them at lower price points - a phenomena that is relatively recent and was unheard-of two years ago.

Another casualty of the growing cost is shirking choices for consumers, who are willing to purchase affordable devices. Data shows, shipment in the sub-Rs 18,000 price segment dropped by 16 per cent in January-March over the same quarter last year. While, mid-range segment of Rs 18,000-27,000 grew its share in the overall smartphone market to 18 per cent from 14 per cent in last one year. The mid-premium segment (Rs 27,000-45,000) grew by a whopping 75 per cent year-on-year. While, the premium segment (above Rs 45,000) accounted for five per cent of the smartphone market, with 60 per cent of shipments coming from Apple (iPhone).

While some consumers, who can afford, are upgrading in search of better features while repeat purchases and easy consumer finance schemes are of help, says Chandu Reddy, Director at Sangeetha Mobiles. Many are looking to refurbished models that now offer better value for money as even after increasing budget by 25 per cent consumers are unable to get better features in new handsets due to rising prices.

According Madhav Seth, Vice-President at Realme, the company is working to find a solution to the problem. “Consumer are unable to find any major upgrade even at the same price points”, he says.

One of the repercussions of this exorbitant price hikes is the average buying cycle of smartphones has increased significantly in last two years - from less than 15 months to close to two years (22 months).

The worst is not over yet. For consumers, who are already grappling with ever-growing household budgets, may have to bear the burnt for a few more quarters at least. With Chinese ports out of operations due to lockdowns in the country, shipments continue to get disrupted and another 5-10 per cent price hike is on the horizon, says industry experts.

Published on: May 25, 2022, 2:51 PM IST
Posted by: Vivek Dubey, May 25, 2022, 2:46 PM IST