Will Chinese smartphone manufacturers be able to absorb the rupee shock?
- As the rupee hit an all time low against the dollar, it hasn’t fared too well against the Chinese RNB either.
- Chinese smartphone manufacturers, especially for budget phones, operate on very thin margins that may not be able to compensate for the volatility in prices.
- In order to correct that, it’s possible that the prices of smartphones may increase ahead of Diwali sales this season.
Premium smartphones, on the other hand, probably have enough of a cushion to ride out the volatility and walk away without having to change the prices.
And it’s not just about the India rupee being more expensive against the dollar, but also the fact that it has devalued 5.4% against the Chinese RNB. in the past few months.
While this may have an impact on the affordability of budget devices, at least smartphones aren’t imported as completely built units anymore. Out of the 300 million smartphones smartphones that were sold in the country last year, nearly 60% were assembled in India.
Some brands will have a bit of breathing room with local manufacturing centers set up for their printed circuit boards (PCB) but then again, that’s only a part of the problem. While PCB’s can support and connect all the electronic components inside a smartphone, said components will probably still have to be imported.
The main Chinese brands competing in the budget smartphone segment are Xiaomi, Vivo, Oppo and Huawei’s sub-brand, Honor. Samsung, while being Xiaomi’s main competitor, is a South Korean conglomerate and also has its own factory set up in India, so it probably won’t see as much disturbance in product pricing.
So, all in all, if you were planning on buying a new smartphone this Diwali, you probably want to prepone that decision before prices inflate. Or, you could just ride out the wave and see what happens.