Smartphone brands have been largely holding back and absorbing the increased cost of imported components to spur demand during the festive season.
But that could change from November onward, said the people cited above.
An increase in prices will also push up the industry average selling price (ASP) to a record Rs 20,000 in the fourth quarter of 2022 from Rs 17,000 in the April-June period, said market tracking company IDC.
Cost Pressures <\/strong>
\"The depreciation is certainly increasing the cost pressures. As a brand, we have been well-placed to absorb the impact of USD appreciation for the past few months,\" said a Xiaomi India<\/a> spokesperson. \"We may need to upward revise the prices if the US monetary policy tightens further and the USD\/INR exchange rate continues in this direction.\"
Counterpoint Research senior analyst Prachir Singh expects a 5-7% increase in smartphone prices after the festive season, especially in the entry segment, which is already under pressure of diminished margins this year.
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\"Any fluctuation in forex rates has a larger impact on the bill of materials (BOM) for budget smartphones, which may be passed on to the consumer after the festive season is over,\" he said.
Conservative outlook<\/strong>
As a result of higher prices, year-on-year growth forecasts may also see a downward revision.
IDC India<\/a> has maintained a conservative outlook for the year, forecasting shipments to remain flat versus last year, while Counterpoint India said there could be a roughly 3% reduction in annual growth figures from current estimates.
The rupee has been weakening against the dollar steadily since June, slumping to a record 82.86 on October 9. This has led to increased cost pressures on smartphone brands in India, which, while manufacturing locally, still have to rely on components imported from other countries.
\"We are paying higher on components that need to be imported for smartphone manufacturing due to a direct impact of the higher exchange rates. These include the chipsets, memory, image sensors and, in some cases, the display,\" said Sunil Raina, president of homebred Lava International. \"That leaves us with two options - either increase prices or take a hit on profits. For now, we have not passed the increased costs down to the consumer, we are balancing it somehow. But eventually, if the slide doesn't stop, we will have to look at price hikes.\"