China Covid waves: India handset shipments may get hurt if China Covid waves persist

Smartphone brands in India may face a supply crunch for components from the middle of next month if the current surge in Covid cases continues in China and because of Chinese New Year when most factories are shut, said market trackers.
But that alone may not cause any immediate concerns for the brands since they have taken their learnings from previous disruptions and stocked up on components enough to service the demand, which is already muted in India.
“If the situation plays out for another three weeks, we may see disruptions in component supplies for the smartphone brands that rely heavily on components from Chinese factories,” said Faisal Kawoosa, chief analyst at market research firm TechArc.

The disruptions – if at all – will impact the launches slated for early next year. Brands have already stocked up on components for older models to maintain production at levels required to service the local demand. Furthermore, they will also have higher inventory going into the next year because of an expected slower fourth quarter.
Mainland China is grappling with a new surge in Covid cases after the ease of restrictions, with hospitals overwhelmed, according to tweets by Eric Feigl-Ding, an epidemiologist and health economist based in China. He expects 60% of the country’s population to likely get infected over the next 90 days. The US is monitoring China’s Covid situation and expects potential impact on its companies and supply chains, he said.
Meanwhile, according to some analysts, the demand situation in India is quite bad amid economic worries.
“It’s not that the market is growing very fast which will make brands scramble for supplies. The launches will happen. January and February don’t see much volumes, at least in the mass segment, which in itself is not growing, so we don’t expect any disruption in the near term,” said Navkendar Singh, associate vice president at market tracker IDC India.
“Even if this goes on till January, I don’t think it will have a more adverse impact than it is already predicted to be,” he added.
Market trackers have been lowering their shipment forecasts for the year after a weak third quarter. IDC India estimates India to see shipments of 150 million units, down from the 160 million predicted earlier, while Counterpoint Research expects the number to be 163 million, missing its earlier forecast of 175 million. CMR India has predicted a 5% decline to 165 million units.
IDC India’s Singh said the shipments next year would be at levels last seen in 2019. “Optically, there will be higher volumes because of the Rajasthan government tender to distribute 1.35 crore (13.5 million) smartphones, but the open market will see fewer shipments than this year,” IDC’s Singh said.
Kawoosa expects major brands like Samsung and Apple not to see too much of an impact. Samsung has a diversified supply chain which it can leverage if there are disruptions in production in China, while Apple being a priority customer for the supply chain will be able to secure its supply ahead of others.
However, analysts warn that more than the Covid disruption, fears of an upcoming recession have smartphone brands worried. This year was a tepid one for the smartphone industry. Analysts expect the market to shrink for the first time since 2020, the first year of the pandemic which was marred with lockdowns and disruptions.
“I think the biggest trouble for smartphone brands is the recession. As I know, brands are not worrying about the supply side now,” Ming-Chi Kuo, analyst at Hong Kong-based TF Securities, wrote in his insights on Apple.
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