Chip shortage hit entry-level smartphones the most

Popular entry-level offerings from leading smartphone brands like Redmi, Oppo and Vivo are in short supply across India, indianexpress.com Have got. Many retailers blamed global semiconductor chip shortages for the unavailability of budget phones, forcing many brands to either increase the prices of popular budget phones or focus entirely on models that made a profit. can go.

“For the last six months, we have not been getting supply of budget phones from Mi, Oppo, Vivo and Samsung,” a store manager of a Delhi-based retailer said on the condition of anonymity. The phones that are hard to come by in retail stores are priced between Rs 7000 and Rs 10,000, which are aimed at entry-level consumers or first time smartphone users. “There was a time when we used to get 10 units of a popular phone model and now we are not getting even a single unit,” said the manager, adding that a popular Chinese smartphone brand has placed a condition that if we sell a certain phone of its The number of mid-range phones and if we meet the target, then only the company will reinstate the in-demand budget phone models.

Another retailer said, “There was a time when brands used to pressurize us to sell a phone priced at Rs 7000, the same phone is not available for Rs 8500. I have not seen this situation before.” indianexpress.com,

Employees of several specialty retailers dealing in smartphones repeated the story of low stocks and low shipments, with little guidance from phone companies on when things might return to normal.

The pressure to sell smartphones above Rs 12,000 can be clearly seen when consumers visit Xiaomi’s online store. (ScreenGrab/Xiaomi India Online Store)

Current chip shortages have disrupted the supply chain and smartphones are affected by this, especially the low-end models that do not necessarily generate cash but help increase unit sales for the brand. “We are getting the supply of all Samsung smartphones except those that are priced lower,” a retailer said. indianexpress.com, “Due to the lack of chips, a company like Samsung doesn’t want to make Rs 5000 phones, but wants to invest in models that make profits.”

The retailer, which deals in multiple brands, admitted that major phone companies have recently shifted their focus to selling smartphones priced above Rs 12,000 due to a change in business strategy in the wake of chip shortage.

The pressure to sell smartphones above Rs 12,000 can be clearly seen when consumers visit Xiaomi’s online store. The brand now offers its Redmi smartphones starting at Rs 12,499, though many low-end phones are still listed on the site but are out of stock including popular models like Redmi 9A and Redmi 9A Sport.

In fact, earlier this month, Xiaomi increased the price of Redmi 9A and Redmi 9A Sport by Rs 300 and attributed the lack of a chip in the even more expensive Redmi Note 10 series. In recent months, flagship smartphones such as Oppo and Vivo have also increased the prices of their mid-range phones in India. Obviously, the subsidized price points are no longer sustainable.

“Due to the lack of semiconductors, more expensive chipsets are preferred, where you can generate more revenue. This is why, given the current supply, low-end smartphones that fall in the less than $150 price bracket , have been most affected,” explained Canalys Research Director Rushabh Doshi.

Doshi said the cost of chipsets has become so high that the only way to sustain the business is to use those chips in models that cost between Rs 15,000 and Rs 20,000. According to Doshi, most brands still want to release low-end phone models, but for now their preference has shifted to more expensive models.

Smartphone shipments in India fell 5 per cent year-on-year to 47.5 million units in Q3 2021, according to Canalys, as phone companies struggled with supply issues for low-end models.

“Smartphone prices have gone up by 7 per cent to 10 per cent in the last one year,” reiterated another store manager at a Delhi-based specialty mobile retailer. Having said that margins are coming down. The same manager also highlighted the long-discussed issue of preferential treatment to online retailers by providing more units than physical retailers.

“When you look at the unorganized labor which is the main market for Xiaomi’s low-end smartphones, a lot of informal labor has been hit hard by the pandemic. Those people are not really upgrading their smartphones, they are sticking to older smartphones, which is why you will see less demand on the lower end,” Doshi said.

While players like Xiaomi are exposed to chip shortages due to their focus on the bottom tier of the smartphone market, the truth is that entry-level phones tend to cost more than they were a year ago. “The whole market has been shifted upwards,” Doshi explained. “Consumers are slowly moving towards the high-end of smartphones as they realize they can do a lot more by spending $100 more on a phone.”

Doshi says brands like Apple and Samsung have performed well on a daily basis despite chip shortage issues because they are vertically integrated compared to Xiaomi, Vivo or Oppo. “Apple has come out of this pandemic very strongly,” Doshi said, adding that the company had already realized that people wouldn’t spend much money on a new device and their current price reflects that. Apple’s long relationship with TSMC and the fact that the Cupertino giant designed its own chips also helped the company deal with semiconductor shortages. Also supports brands like Apple and Samsung where Xiaomi or Vivo fall flat, their stronghold on the supply chain as well as other product categories to make money. Over the past year, Apple’s Mac business has shown growth while Samsung’s tablet business has grown.

Xiaomi smartphone, Redmi phone, lack of chip, Redmi 9a, Vivo smartphone, Oppo, iPhone 13, Samsung phone, lack of semiconductor Smartphone shipments in India fell 5 per cent year-on-year to 47.5 million units in Q3 2021, according to Canalys, as phone companies struggled with supply issues for low-end models.

So which brands are more vulnerable to chip shortages? “The people who are being impacted are definitely the vendors who have low-cost smartphones compared to the more expensive phones, where they are able to digest those extra costs of chipsets,” he said.

There is much to be learned from the pandemic and the ongoing chip shortage. Doshi predicts consolidation in the retail sector as a lot of retailers will exit the market, given the fact that the pandemic lockdown has had a prolonged impact, and then now there are supply chain issues. Due to the current market scenario, physical retailers are at the lower end of the priority list for obtaining supplies. However, Doshi cautions that sellers need to be careful as consolidation in retail will only hurt them in the long run.

“Managing the offline versus online ratio is the biggest challenge for sellers right now,” Doshi said. While offline retailers are essential for their expansion in India, the share of online sales has increased during the pandemic. “I think the reason there is so much uncertainty in the market, not only online but also offline, is that the sellers themselves do not know how much supply they can get, and how much they can produce.”

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