NEW DELHI: Smartphone sales growth estimates for 2019 are being pegged at their slowest, except for 2016, which was the year of demonetisation. Some experts said they are cutting forecasts to factor in expected weak consumer demand in a slowing economy, despite a robust first half for the devices that implied their sales wouldn’t be affected.

Market research firm TechArc has cut its 2019 smartphone sales growth estimate by over two percentage points to 10.5%. Hong Kong-based Counterpoint Research is “closely” monitoring the market. International Data Corp has predicted “weak demand”. Xiaomi and Motorola Mobility estimate high single-digit growth in 2019 — the slowest, barring 2016.

Purchase plans have been put on hold by Indians amid the bad economic tidings, not a good sign with the festive season ahead.

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Fewer Model Launches Ahead of Festive Season

“Several consumers are holding their investment plans, not to talk of spending,” said Faisal Kawoosa, founder of TechArc. “As of now, it appears smartphone market will be hit to some extent by these (slowdown) sentiments and people will defer their decision to purchase or upgrade even in the upcoming festive season when the market is expected to be fully loaded with offers and discounts.”

TechArc has lowered its smartphone sales growth estimate to 145 million units from its earlier projection of 149 million. “Our initial expectations were that the market will grow at around 13% in 2019 compared to 2018,” Kawoosa said. “This will now be 10.5-11%.”

The economy grew at 5% in the June quarter, its slowest in over six years, underlining fears of a wider slump with sales in other consumer sectors such as autos having shrunk.

“By and large, I think that the smartphone industry is growing in the lower single digits, but it is growing,” said Motorola Mobility Group managing director Prashanth Mani. By comparison, India’s smartphone sales grew 29% in 2015, falling to 5% in 2016, then rising to 14% each in 2017 and 2018, as per IDC India.

Counterpoint estimates shipment growth at about 10% in 2019, the same as in 2018. When asked whether the firm would lower its yearly smartphone projection, research director Tarun Pathak said the market research company was “watching the situation”.

Robust first half

The industry had a robust first half to June, outperforming other consumer segments, driven by discounts and offers, mainly in the online channel. But that may come back to haunt the industry and take the shine off the upcoming festive season, which typically accounts for at least a third of annual sales, said experts.

“This had indeed taken over some purchase appetite from the routine festive period that falls in third and fourth quarters of the year,” said TechArc’s Kawoosa. “In fact, holding such festivals pushed sales in the first two quarters, which are not typically that high in number.”

Smartphone launches leading up to the festive season are expected to be down by about 30% to around 100 models, according to data from 91mobiles.com, reflecting the muted sentiment. Companies typically introduce a number of new models at this time to take advantage of festive demand.

Xiaomi’s head of categories Raghu Reddy and Motorola Mobility’s Mani have in fact said that the smartphone market is expected to grow at the same momentum as in the first half, when shipment growth was 7-9% from the year earlier. Typically, growth in the second half is much higher than the first, thanks to the festive season.

With handset makers likely building up stocks ahead of a make-orbreak festive season, industry insiders and market experts fear an inventory pile-up in the December quarter if buyers don’t bite.

“Third-quarter shipments are likely to be high,” said Navkendar Singh, research director, IDC India. “However, we feel that macro consumer sentiment will have some effect on purchases in smartphones. It’s possible that brands may have inventory glut in the fourth quarter, on the back of weak demand.” Purchases will have to be “closely watched”, he said.





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