Since the global activity of the printed mobile phone market has started to increase, the number of industrial chain manufacturers that have attracted local investment is growing year by year; at the same time, various tax policies related to the Indian mobile phone industry are constantly being updated.
On the 16th, the Goods and Services Tax Commission of India convened a meeting. The meeting proposed that the GST tax rate for smartphones be raised from 12% to 18%, and it will be implemented on April 1, 2020. It is worth noting that this decision is likely to increase the price of smartphones.
Prices may rise under cost pressures
As the total demand for the global smartphone market is increasingly saturated, terminal brands and the industry chain are subject to varying degrees of cost pressure, and the impact of this year's epidemic has made this situation even worse.
As we all know, this year's new crown pneumonia outbreak has spread on a large scale worldwide. So far, many countries and regions in the world are still in the stage of anxious confrontation with the epidemic. As a result, the global consumer electronics market has been hit hard, and end-user buying has fallen sharply.
The first is the Chinese market. The Chinese market has always played an important role in the global smartphone industry. Therefore, during the outbreak of the epidemic in China, many foreign and domestic brands directly reduced their sales forecasts for the first quarter.
However, shortly after the domestic epidemic was effectively controlled, overseas regions including Japan, South Korea, Europe, and the United States were also heavily attacked by the new crown virus. Overnight, many major consumer markets around the world became very cold; Brand manufacturers have to revise their performance again. According to Jiwei.com, many brands have reduced their estimated sales in the first half of the year by more than 15%.
The market demand has greatly reduced, so that the mobile phone industry chain will face severe cost pressures. On the one hand, a large amount of inventory backlog is formed from the terminal to the supply chain, and on the other hand, the heavy asset operation under the emptiness of orders of component manufacturers.
Under such a premise, India's move to increase the GST tax rate on local smartphones will undoubtedly worsen these companies. Consumption tax growth of 6% will obviously reduce the profits of terminal products. In order to alleviate their own pressure, terminal brands have only two options: price increases and cost reductions.
However, as we know, although India has the second largest consumer volume in the world, it is still at a low level of consumption as a whole, so the mainstream product in the local area is still about a thousand yuan mobile phone. If you choose to increase the price of terminal products, you may lose a lot of brand sales in the local market.
Can the Indian market halo be maintained?
When the Indian mobile phone market is booming, many voices have crowned it as the "next Chinese market" aura. The global mobile phone industry chain has also been using this as its goal for many years to tap the development potential of the local market. From the stage where feature phones and elderly machines are the mainstream, to the current stage where smartphones are gradually becoming popular.
However, the dual impact of the epidemic and tax rates may break the current situation.
In fact, in addition to the rise in tax rates that may cause price surges in the Indian market, the lack of production capacity of mobile phone factories due to the epidemic has also triggered this phenomenon. "We know that some people are stockpiling the best-selling models of top-selling smartphone brands, especially in segments that cost less than $ 150, and they expect to reach Prices will rise. "
Under the combined effect of two major factors, this wave of price increases may come faster and more obviously.
However, contrary to this trend is the average level of consumption in India. Even after years of development, the largest mobile phone category on the market is still a thousand yuan handset. IDC data shows that products below $ 200 in 2019 still account for 79% of the Indian smartphone market share.
If there is a price increase, the major terminal brands currently occupying the Indian market are likely to need to reduce sales this year, and at the same time, the brand's demand for supply chain orders will also decrease.
Looking back on the past two years, in order to solve the problem of import tariffs on finished parts and components, driven by terminal brands, a large number of domestic enterprises have set up factories in India. When the demand for terminal brands has repeatedly decreased this year, the local production lines of these supply chain companies will also become vacant. The workload and salaries of production line workers will also decrease simultaneously, and the market consumption power will once again be weakened.
Although this tax policy introduced recently seems to be a decision that can benefit India's finances, the Indian consumer electronics market represented by smartphones may be hit hard this year due to the chain reaction of the industrial chain.
Manu Kumar Jain, head of Xiaomi India and global vice president, said the move would bring down the entire industry. Jain pointed out that the depreciation of the rupee against the US dollar and the disruption of the supply chain have put the industry in trouble, and an increase in the consumption tax rate will affect the efforts of the smartphone industry to manufacture in India.
