The Indian smartphone market saw a significant drop in shipments in Q2 2020. The primary reason for it was the nationwide lockdown that lasted for almost the entire second quarter. Things started to pick up as lockdown restrictions eased and people bought more smartphones while they worked from home. However, it looks like we are about to see another major drop in smartphone shipments in India. India is currently witnessing the second wave of COVID-19. This has resulted in several states announcing a lockdown or some form of restrictions. However, this is not the only reason for a dip in smartphone shipments. Xiaomi, Realme, and the likes are set to lower their shipment targets in India.
Xiaomi revises its India targets, reduces smartphone shipments by 25 per cent
The pandemic has disrupted the supply chain, leading to the unavailability of raw materials and smartphone stocks. As the industry regains some momentum, several factors are causing companies to lower their smartphone shipments in India. Xiaomi, for example, is reportedly reducing its shipment targets by 25 per cent. The pandemic is not the only reason for this.
Pandemic-hit supply chain
As stated, the first and foremost reason for the reduction in supply is the pandemic. Although the demand for smartphones and accessories has been on the rise, smartphone manufacturers are struggling to keep up with the demand. Companies are unable to get the various chips required to power their smartphones. This is not just limited to India but globally. The chip shortage could get even worse in 2021 due to the drought in Taiwan. It is the largest manufacturer of chips in the world, led by the Taiwan Semiconductor Manufacturing Company (TSMC), which makes chips for almost every electronics company in the world, including Qualcomm. While TSMC owns over 55% of the foundry market share, according to Counterpoint, other Taiwanese companies — like United Microelectronics Corporation (UMC), Vanguard International Semiconductor (VIS) Corporation and Powership Semiconductor (PSMC) — take that market share up to nearly 70 per cent.
Transition to 5G network
Another reason for the drop in shipments is due to companies opting for 5G smartphones over 4G devices. Indian telecom operators are expected to begin testing 5G networks in the country within the next six months. Smartphone manufacturers have already begun launching mid-range and premium 5G devices in the world’s second-largest smartphone market.
Reports suggest that these companies are reducing the shipments of 4G devices in the country. Xiaomi has reportedly lowered its shipment targets from 240 million to 190 million units, which is roughly a 25 per cent drop. Realme, on the other hand, has dropped its targets by 29 per cent, which is roughly 60 million units. Another Chinese player, OnePlus, has dropped its targets by 40 per cent in India. The company aims to ship only 12 million units, as opposed to its previous target of 20 million units. We can expect other Chinese smartphone companies in India to follow suit and focus more on 5G smartphones compared to 4G phones.
The border dispute last year at the Galwan Valley in the Ladakh region has led to the rise of anti-China sentiments in India. Since then, the government has taken some action against Chinese products in the country. For example, the government put a ban on games and apps developed by Chinese companies. Among the popular ones are Tencent’s PUBG, TikTok, UC Browser, AliExpress, etc. The ban is not just limited to apps but also hardware. The Department of Telecommunications (DoT) has not approved any Chinese telecom gear makers for supplying equipment for 5G trails in India. Also, the government introduced additional duties on electronic items being imported from China. Some even struggled to get clearances from the customs office and remained stuck at the dock.