The nationwide lock down announced on March 25 also marked a lockdown on annual profits of companies in the mobile and electronics sector. The sales have plummeted owing to the closure of electronics stores pan India. Ecommerce sales via retailers such as Amazon and Flipkart are in no good shape either, as these online platforms have temporarily suspended the sales of white goods and mobiles and are solely focused on essential goods. The electronics and mobile industry is looking at an annual decline of 25-30% in business.

China shutdowns hit Indian mobile companies

China accounts for 85% of total value of components used in smartphones, such as mobile displays, circuit boards, etc. From April to December 2019, India imported telecom accessories worth $4.5 billion from China which accounted for 40% of India’s total imports.

As the Coronavirus outbreak hit China, vendors hiked component prices by 2-3% due to supply shortage after closure of factories. The mobile market in India had started getting impacted due to the situation in China, even before the epidemic hit India.

The slowing Chinese economy could have been a shining opportunity for Indian exporters to supply more goods to the global market. However, Indian telecom accessory manufacturers could not make use of this opportunity, because of their dependence on inputs from China.

Plunging sales of smartphones in India

India’s smartphone market recorded 46.6 million units sold in 3Q19 (IDC India Report), however, due to the COVID-19 outbreak, smartphone brands are dealing with dipping sales. Also, India’s contribution to global smartphone production had jumped to 16% from 9% in 2016 owing to the US-China trade war. However, in the current scenario, manufacturing units have halted the production of mobiles and it is speculated that India’s share in global smartphone production will fall to the levels that were prevalent four years ago as organic growth will be bleak, and consumers will only buy a phone out of necessity or basis their spending ability.

Sales slowdown, supply chain squeeze and cashflow crunch have resulted in loss of approximately 50% of the electronics and mobile business on an average, over the same period last year.

The hit of custom duty

In Feb 2020, the government announced increasing customs duty by 5-10% on imported mobiles and chargers. While industry observers stated that the hike in import duty won’t impact consumers, since 97% of mobile market demand is being met through domestic production, the reality was different.

In an interaction with Karol Bagh Market Association members, SOLV found that there was a lot of angst on this issue. Since the manufacturing of mobile and accessories is not happening at the same scale as in China, sales in India have dipped. The cost of procurement of mobile parts and office infrastructure is thus being passed on to the customer, thereby making the product further expensive and leading to adverse impact on sales.

Moreover, mobile phones were earlier exempted from the 10% service welfare cess, but it will now be re-imposed on imported handsets over and above existing 20% basic customs duty.

Stay home, stay connected?

  • The lockdown led to closure of all educational institutions and offices. While schools have shifted to virtual classes, offices have shifted to virtual meetings. However, everyone has adequate hardware needed for participation in virtual classrooms or meeting rooms.
  • Given that many people are not stepping out of their homes, and ordering home delivery of essentials through online grocers, mobile phones have become vital in this lockdown period. And with mobiles not being considered as essential goods, it would imply that those who don’t already have one, can’t get one, and those who want their mobiles serviced, cannot get that done either.

Mobile phone – an essential?

In a letter written by the India Cellular & Electronics Association (ICEA) on Mar 29, the Prime Minister wase requested to consider the service, maintenance, and delivery of mobiles and ICT (Information and Communications Technology) products as essential, emphasising that mobiles/tablets and other computing devices are critical to proper functioning of crucial government bodies as well as hospitals and the police. ICEA also requested the PM to at least consider the sale of mobiles and computing devices via ecommerce platforms.

Now that the Government of India has also launched AarogyaSetu mobile app to track spread of the Coronavirus, having a functional smartphone becomes a must, which further highlights the importance of mobiles.


  • Mobile phone makers seek rollback of GST increase of 6% with immediate effect as the hike to 18% from 12% would draw out ₹15,000 crore from the ecosystem and devastate the retail sector
  • Correction of the inverted duty structure by bringing down duties on mobile and electronic parts and components is also needed
  • Mobiles should get the essential tag and the government should allow resumption of servicing and sales of existing mobile phone models.

What next – addressing the latency in demand?

To capitalise on pent up demand, mobile phone brands are likely to flood the market with new devices after the restrictions are removed. Though offering discounts in the near-term would be difficult because of the 6% GST hike on mobile phones, it is better to flush the market with aggressive discounts during festivals.

Make in India Investment Schemes

The ministry of electronics and IT has notified three incentives schemes worth ₹48,000 crore for pushing electronics manufacturing.

  1. Production Linked Incentive (PLI): With an outlay of ₹40,000 crore, this scheme will give incentive of 4-6% on incremental sale of mobile phones and specified electronic components, such as Printed Circuit Boards (PCB), photopolymer films and Assembly, Testing, Marking and Packaging (ATMP). It will be applicable from Aug 1.
  2. Electronics Manufacturing Clusters (EMC) 2.0: This scheme is aimed at development of world class infrastructure to help India to become the mobile manufacturing hub in the world. The government has proposed a total outlay of ₹3,762.25 crore.
  3. Electronics Components and Semiconductors (SPECS): This will provide financial incentive of 25% on capital expenditure for select electronic goods, like components, semiconductor/display fabrication units, ATMP units, etc. This scheme also supports expansion of capacity, modernisation and diversification of existing units, and investments in new units.
  4. ₹42,000 crore booster for India’s local mobile manufacturing: This scheme endeavours to integrate India into the global supply chain as China struggles to meet demand with shut operations amid the Coronavirus outbreak. As India’s electronics hardware manufacturing sector suffers due to lack of adequate infrastructure, domestic supply chain and logistics issues, high cost of finance, unavailability of quality power and inadequate design capabilities and skills, this scheme will help in removing these issues besides getting rid of dependence on China.

The bright side: Mobile and accessories import

The quantity and value of mobile phones, including accessories imported by India in the past three years, have witnessed a significant downfall of 64% in quantity and 57% in value due to rise in foreign investment and improved manufacturing capacities. Import of push-button mobile phones came down from $935 million in 2018 to $400 million in 2019; and smartphone import came down to $1216 million in 2019 from $2602 million in 2018.