BackCovid-19: Lockdown disrupts phone manufacturing in India, weakens demand
Many phone distributors have units in stock for the next 25-30 days but the bigger concern is the fall in demand for phones due to the lockdown
PremiumNEW DELHI: Taiwan-based Foxconn and Wistron, which manufacture phones for several companies including Apple and Xiaomi, have suspended production at their India plants until April 14 in accordance with the lockdown of three weeks in the country, Bloomberg reported.
Though many of the phone distributors have units in stock for the next 25-30 days, the bigger concern for companies is the fall in demand for phones rather than deferment of production due to the lockdown.
“The lockdown will also affect the economy and will weaken the end user demands for phones as people will be focusing more on purchasing necessities," said Rushabh Doshi, research director at Canalys.
Foxconn has two plants in India -- Sri City in Andhra Pradesh and Sriperumbudur in Tamil Nadu -- employing 15,000 and 12,000 workers, respectively. Foxconn’s plants have been manufacturing iPhone XR since October.
There had been talks of producing iPhone 11 in India in future. Wistron has three facilities India, two of them are located in Bengaluru and one in Narasapura. Wistron makes iPhone SE and iPhone 6s for Apple in India.
Following the earlier lockdown order in 75 cities, Xiaomi said in a press statement, “we work with contract manufacturers so the onus relies completely on our partners. We can only recommend them." According to reports, 99% of all Xiaomi phones sold in India are being made in the country.
“A considerable number of Xiaomi phones are made in India. Some of the Apple iPhones are also now made in India. However, regardless of whether they are making in India or procuring from China, both supply chains have been disrupted. Even getting components from China is a challenge right now. I would expect them to go for downscaling anyway," said Faisal Kawoosa, founder & chief analyst at techARC.
Globally smartphone production is likely to drop by 30% in first half of 2020 due to disruption in supply chain, labour shortage and inactive logistics in China, according to a recent report by ABI Research.
Offline channels are closed right now. Online channels are still active but there are huge delays in delivery. Kawoosa said, with the lockdown in place, getting products like phones delivered even from online platforms will be difficult.
Doshi said sales in March quarter were in line with expectation as it is a typically slow quarter for phonemakers. In June quarter, we see some sales as it is the beginning of a new fiscal year and so there are new purchases. But due to the current situation June quarter is expected to start on a weak note. "Although we might lose more than half a month for Q2, our shipment forecast for Q2 will only drop by 10%. But by the end of Q2 we will see normalcy return," he said.
Will this affect prices? Kawoosa feels that from brand point of view a price hike is unlikely as of now because there is no huge demand and companies are not able to meet them. The only thing that can happen is that certain dealers might try to take advantage and charge higher prices.
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