Featured

NEW DELHI: Handset makers are concerned that the grey market may swell for entry and mid-level smartphones in the absence of local supplies and high goods and services tax. The brands are currently grappling with shortage of smartphones due to factory shutdowns and labor-related issues.

"The greater danger is of the grey market raising its ugly head beyond high-end phones to even entry and mid-level phones because of high duty and increased GST— the grey market is nearly 70% in high-end phones," Pankaj Mohindroo, chairman of India Cellular & Electronics Association told ETTelecom.

"Most products are made in India but high-end phones are made outside. the grey market was around 50% but it is nearly 70% for this segment. Similarly, we are seeing this happening in entry and mid-range," he said.

ICEA represents Xiaomi, Oppo, Vivo, Lava, Apple, Foxconn and Wistron among others.

Tarun Pathak, associate director at Counterpoint said that this could mean parallel imports where some companies import under different HS codes to save duties. "...but a big brand won't do that, but long-tail brands might do...they are around 10% of the market."On imports, he said that handset brands could look at importing older models where BoM cost will be cheaper over a period of time and demand still remain strong.

"So instead of providing a deep discounting brand will absorb a part of import duties...We have been internally evaluating "unstable inventories" and the absence of stock can bring in a risk of losing a consumer to competitors. Importing phones can be a short term option esp when factories are running at low capacity," Pathak said.

ICEA's Mohindroo said that bringing manufacturing to normalcy is a humongous task and by the end of June, the industry is likely to reach about 50% of normal production. "Import duty is extremely steep at 22% and it is extremely difficult to be competitive. But customers have to be served nevertheless so our members may resort to temporary import," he added.

Comments are closed.