Coronavirus to impact Chinese phone brands, delay launch in India

The novel coronavirus may derail the Indian plans of Chinese smartphone makers in 2020, as China’s lockdown, in the long run, can severely affect the flow of key components needed to assemble smartphones at their manufacturing plants in India.

According to industry experts, if the lockdown continues for more than a month or so, it will hamper the go-to-market strategy of almost all Chinese brands, as China supplies the bulk of various semi-disassembled components. (SKD) such as memory chips, touch keys. Protective panels / glasses as well as semiconductors for smartphone assembly lines in India.

Unlike fully-built units (CBUs) which are end products, SKD requires manpower to assemble five-six key components which are imported and China is the main supplier, along with Vietnam and Taiwan.

Most Chinese brands are currently involved in almost 100% SKD-level production in the country.

“The long-term impact of the coronavirus will impact future smartphone launches as various brands will struggle to maintain their time-to-market planning following the delay of SKD’s arrival in India.” , Tarun Pathak, associate director, Counterpoint Research, told IANS.

“With SKD components stranded in warehouses in China, the entire supply chain will be affected as it is a transparent, efficient and time-bound process for any brand of smartphones to gain a foothold in the market. highly competitive Indian, ”Pathak added.

Currently, nearly 12% of SKD components are sourced locally, while the rest of the 88% comes from China, Taiwan, Vietnam and Japan, with China being the largest supplier.

“The entire global supply chain will be affected, pushing back launch dates if the virus is not controlled quickly,” Pathak noted.

According to Varun Mishra, research analyst at Counterpoint, supply chains have been disrupted, causing various companies to rethink their strategies and reduce their reliance on single markets.

“2020 will likely see efforts to further diversify investment across geographies to mitigate risk. The current coronavirus outbreak in China is the latest issue threatening supply chains,” Mishra said.

Sensing the problems ahead, Chinese smartphone makers are currently in a group and are developing a strategy for Plan B in case the supply chain remains affected for a long time.

A well-established Chinese brand told IANS that currently travel plans are affected and those who have been to China on a business trip have been advised to stay there until the situation is under control and the threat is minimized.

“There is a total travel ban. Those based here are in ongoing talks with their Chinese counterparts to understand and how to control the supply chain problem once it arises. things appear to be in place, ”said a company employee. told IANS on condition of anonymity.

India had to import $ 13 billion worth of components in 2018.

“Few of the high-value components come from India. As a result, local added value in India was 17% in 2018.

“It has helped the country save $ 2.5 billion on forex, but the increase in assembly operations in India has led to imports of cellphone components reaching $ 13 billion,” Pathak said.

The opportunity for original equipment manufacturers (OEMs) to source chips locally is still almost four to five years away.

“Local chip sourcing will only happen once the ecosystem of low-value components is strengthened and export incentives are put in place,” Pathak said.

Half of the handsets sold in India in 2018 were imported as SKD, while only 34% were imported as CKD.

However, by the end of 2019, cellphones imported as CKD are expected to reach 75%, while 25% will be in the form of SKD.