A ‘sharp contraction’ in smartphone market predicted as consumers to shift purchase priorities

Things are going to get tough for smartphone companies are consumers are most likely to shift their purchase priorities to essential items in the coming months due to the Covid-19 pandemic. The smartphone companies are also likely to be affected the economic impact of the lockdowns and a possible economic slowdown. While many key launches have been deferred, smartphone production in the country is set to decrease by nearly 40%.

Counterpoint Research has predicted a "sharp contraction" in the smartphone market.

"Our conclusion is that we expect to see a sharp contraction as consumers withhold making discretionary purchases during periods of maximum uncertainty. The result is an extension in the replacement cycle," IANS quotes Peter Richardson, Research Director, Counterpoint as saying.

"However, we expect that extension will be limited to no more than six months," he added.

While the smartphone companies are assembling phones in India, many still rely on China to source key components. Factories in China are said to have begun resuming production but it's still not at the scale pre-pandemic times. Analysts believe the supply chain disruption will hurt the smartphone companies until the end of the second quarter. Also, it won't be just the smartphone companies to be affected but the consumer electronics players as well.

ALSO READ: GST hike adds to woes as coronavirus outbreak derails smartphone industry

"We further expect that the long run average market growth rate will not vary significantly – but the near term growth rates will reflect the slowdown and then rebound — a similar pattern to that seen in recent recessions but allowing for the different level of market maturity," explained Richardson.

ALSO READ: Xiaomi increases prices of its phones to offset GST hike

It makes sense for the original equipment manufacturers (OEMs) to defer new smartphone launches but, at the same time, support retailers who have been hit strongly, according to Tarun Pathak, Associate Director, Counterpoint Research.

"It has to be a collaborative effort from the government to original equipment manufacturers (OEMs) and other players in the ecosystem to support the partners involved," Tarun Pathak, Associate Director, Counterpoint Research said.

(With inputs from IANS)

Will coronavirus outbreak paralyze global economy