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Smartphone shipments in India fell to 17.3 million units in Q2 2020, representing a precipitous 48% year-over-year (YoY) decline, according to Canalys. The Canalys report suggests that the decline was due to lack of supply more than lack of demand: More than 96% of smartphones sold in India had been assembled domestically, but manufacturing facilities suspended operations during the coronavirus lockdown that began in March and lasted through mid-May.
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Xiaomi and Oppo — which together accounted for 43% of Q2 2020 shipments in India — began importing smartphones from China to India to bolster the limited supply. Coronavirus cases have soared in India since the lockdown ended, particularly in dense urban areas, according to The New York Times. And the economic impacts of the lockdown will not easily be reversed, considering nearly 10 million migrant workers relocated back to villages during the economic stoppage, and an estimated 500,000 of those individuals traveled by foot or bike, sometimes for hundreds of miles, according to Brookings.
The rapid decline in smartphone shipments will disrupt the Indian government’s efforts to grow the digital economy. As outlined in the Digital India initiative, India’s economic development is predicated on growing the base of smartphone users to expand internet access, which is intended to attract foreign investment in the tech sector. Only 40% of India’s 1.3 billion residents currently have internet access, per eMarketer.
The slowdown in smartphone shipments represents a significant disruption to India’s digitization trajectory, and the prospects of a recovery are slim to none through the remainder of 2020. This will hinder Prime Minister Narendra Modi’s “Self-Reliant India” initiative, which aims to use tariffs and subsidies to encourage companies to employ workers in India if they want access to the massive digital consumer market.
India will now be further reliant on big tech companies to accelerate digitization by subsidizing resources needed for internet access. Tech giants have played a central role in expanding internet access within India, as they are often willing to subsidize internet and devices in a bid to grow market share. For example, Jio, the largest wireless carrier in India by subscribers, made its JioPhone “effectively free” in India as the initial payment of Rs 1,500 ($20) would be refunded after three years of service.
Jio offers data for as cheap as Rs 199 ($2.60) per month — we believe Jio will further subsidize plans, as this can expand the market for the super app it is developing in partnership with Facebook. Facebook even tried to give internet access away for free in India under its Free Basics program, but the government intervened on net neutrality grounds, as the service would have only given users access to 80 websites sanctioned by Facebook.
Just last week, Google agreed to purchase a $4.5 billion stake in Jio, and the companies intend to develop an entry-level 5G smartphone aimed at upgrading 350 million people in India who currently use 2G phones. The Indian government will likely look more favorably towards these sorts of initiatives as the coronavirus has disrupted its digitization timeline, and big tech will be given greater leeway to expand access to its services through subsidies as a result.
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