Coronavirus, Economic Slowdown Hit Sales of Smartphones

A report by Lumos from Phonecurry states that the next quarter could be even worse for the mobile phone industry.

The economic slowdown has affected mobile phone sales in the past couple of months.

Photo: The Quint/Muneeb-ul-Islam

As if the general slowdown in the economy hasn’t been bad enough, the ongoing coronavirus outbreak is all set to take its toll on sales of mobile phones in the country. A recent report by Lumos from Phonecurry, a phone-buying advice platform, highlights the sales trends in the first two months of this year and predicts the impact of the coronavirus outbreak on sales in the next quarter.

The report states that the total online sales volume in January and February 2020 is about 30 percent lower than the sales seen in November and December 2019. A part of this is the natural propensity for sales to drop after the festive season sales (October to December).

However, a larger part of the slump has been due to the lower number of new launches in January-February 2020 compared to the same period a year ago. Only 17 new phones were launched among the top 10 brands this year compared to 24 a year ago.

The largest-selling phones are in the Rs 8,000 to Rs 10,000 price bracket in India in online sales.Photo: Lumos Report

The Lumos report tracks sales of phones online only partly through its own platform – Phonecurry – and across other online retailers, not accounting for offline sales. It says India continues to be a “value smartphone market” with over 60 percent of online sales coming from phones priced under Rs 10,000.

The top five online selling brands in the past two months in India have been: Xiaomi, Realme, Samsung, Vivo and Infinix in that order.

Xiaomi is the leading brand in market share with 33.7 percent of phones sold online.Photo: Lumos Report

The impact from the coronavirus impact will show up in sales in the next quarter, as Indian shops already have enough inventory for the first quarter of 2020. The report says there will be a 20 percent decline in production expected – which should translate to a similar decline in sales.

Xiaomi phones are the top-selling brandsPhoto: Lumos Report

Impact of Coronavirus on Mobile Phone Sales

A large number of mobile phones that are manufactured in India, still get some of their components from China. With the coronavirus outbreak and the Lunar New Year holidays extending closure of factories in China till 9 February, there is a slowdown in shipments.

The Chinese government had asked factories to resume production from 10 February, but currently factories are running at only about 25 percent capacity in China. That’s because nearly 60 percent of the workforce has been unable to return to work owing to travel restrictions in China.

Logistics have been hit because of transport restrictions. The report estimates normalcy in production in China to about 80 percent capacity will return only by end April 2020.

India still sources about 75 percent of its mobile phone components from China, while nearly 95 percent of phones sold in India are assembled in India. So there will be a hit to the supply chain. About 85 percent of mobile phone displays components are imported from China.

Since the coronavirus outbreak happened around the time of the Lunar New Year, which is an annual festival, brands in India stock up ahead of time. Hence, the January to March quarter hasn’t been badly hit, but the impact will be felt more in the next quarter.

According to the report, some companies are expected to raise prices by 5-10 percent to intentionally reduce demand and hence manage their stocks.