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The devalued yuan might increase the price of smartphones by 1-2 per cent contrary to the belief that prices would come down.
The reason for this is phonemakers in India use the dollar to trade and not the yuan, similar to software exporters. Distributors and device makers that BusinessLine spoke to pointed out that this is contrary to the common logic that a devalued yuan, which in turn could make exports cheaper, would bring the prices of smartphones and other devices down.
“At first we thought prices can be dropped, coming just a few weeks ahead of the festival season. But that might not be the case as the dollar is at a two-year high, which erodes any gains,” said a Samsung distributor based in Mumbai on condition of anonymity.
Device makers also seem to be of the view that the rupee, which breached 65 against the dollar, would nullify any possible price gains and the impact will not be felt till the end of the year.
“Firstly, since the order to delivery cycle runs into 8-9 weeks, any orders already placed would happen at the original contracted price, which was before the devalued yuan,” says Ritesh Suneja, Group CFO at Lava.
Micromax is learnt to be figuring out ways in which it can maintain the prices of some of its smartphones in the light of these developments, according to a company source. “We are talking to our suppliers on how benefits can be worked in such a way that prices do not go up since the festival season is coming up,” the source said. Other device makers like Samsung, Xiaomi, Lenovo and Motorola declined to comment on the issue.
Shripal Gandhi, founder and CEO of Swipe Technologies, pointed out that bulk of the Indian device makers use the dollar to trade and there is a possibility that prices, in fact, might go up marginally. “Printed Circuit Boards (PCBs), LCDs are all imported and the continued strengthening of the dollar against the rupee is likely to play spoilsport,” he says. According to a report by Rajesh Joshi of HSBC Global Research, as the China market has become saturated, Chinese brands are trying to expand overseas.
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