Data released by the commerce ministry shows that imports of smartphones in July stood at Rs 2,085.2 crore—a marginal 6% fall sequentially but still the second highest in three years.
Import volumes for handsets touched a three-year high of Rs 2,225.2 crore in June, nearly six times that of May and several times the Rs 5.6 crore recorded in the immediate pre-Covid month of February, amid large-scale disruption in local manufacturing.
Smartphone production in India on average has ramped-up to only 65-70% currently, even after three months of the lockdown easing, according to market intelligence firm International Data Corporation (IDC).
In comparison, brands had scaled production on average to 40-45% of capacity in the April-June quarter. Some brands like Vivo though claimed it has currently reached around 90% of its production capacity.
“Operationally, brands are still facing challenges such as worker shortage, Covid spread, disruption in logistics, and partial state lockdowns till August 31 etc,” said Upasana Joshi, associate research manager at IDC, India.
She added that the third quarter (July-September) is the high sellin period as the channel starts preparing for the very important second half with festivals starting from August till November. “In order to cater pent-up demand along with festive demand, brands will continue to do direct imports in parallel to scaling up production to 80-90% by end Q3’20,” Joshi said.
Smartphone market trackers such as Counterpoint Research and IDC have already downgraded this years’ sales outlook to 130-135 million as against 154 million units sold in 2019.
“If the very crucial festive season is short of inventory or faces any other disruption in terms of sales, the market could decline as low as 90-100 million units, that is, behind four years,” an industry expert warned.
High import volumes for July are also a consequence of the rollover impact of the 10-day backlog caused due to customs scrutiny of imports of phone parts in the last week of June, which had caused a near washout in production for Chinese brands, experts said.
Meanwhile, exports of handsets have recovered to pre-Covid levels, with July’s export value of Rs 997.4 crore being similar to March’s `976.3 crore, according to the commerce ministry data.
As per industry estimates, 95% of smartphones sold in India were manufactured (assembled) locally. Brands expect imports of completely built-up units, which attract 20% duty and hurt their margins, to reduce and normalise from August as production in local assembly units rises.
A person close to Vivo said that the brand has reached 90% capacity this month while Realme had earlier said it was expecting to reach 80% capacity this month. Oppo, Realme and OnePlus, all three BBK group subsidiaries, share the same manufacturing plant in Greater Noida. Other major smartphone brands such as Samsung and Xiaomi
did not respond to ET’s queries till press time.