India largely depends on China for smartphone component production and the coronavirus will delay upcoming smartphone launches.

India is the world’s biggest smartphone maker after China. Taiwan’s Foxconn and Wistron make iPhones in India for Apple, and Foxconn also produces phones for China’s Xiaomi. Other smartphone makers in India include South Korea’s Samsung and China’s OnePlus.

However, despite its size, the Indian smartphone market is largely dependent on China for supplies of parts. China provides the bulk of various semi-knocked down (SKD) components, including memory chips, touch panels/cover glasses along with semiconductors for smartphone assembling lines in India.

Unlike the completely built-up (CBU) units that are final products, SKD requires labour to assemble five-six key components which are largely imported. Currently, nearly 12% of SKD components are being sourced locally while 88% is imported, with China being the biggest supplier. India had to import $13 billion worth of parts in 2018.

The long-term impact of coronavirus will hit upcoming smartphone launches in India

So far, smartphone makers in India have weathered the impact of the coronavirus, partly because they had ramped up inventories of Chinese-made parts earlier, to cover the Lunar New Year holiday period when China’s factories close down. For now, the industry hopes the outbreak can be contained within the next two weeks.

However, the process for any smartphone brand to gain a footprint in the highly-competitive Indian market is time-bound. The China lockdown, if continued, can severely impact the flow of key components required to assemble smartphones at the manufacturing plants in India and their time-to-market strategy. The opportunity of initial devices suppliers (OEMs) to resource chips locally is still virtually 4 to 5 years away. While some components can be shipped in from markets such as South Korea, Vietnam or Taiwan, the smartphone makers will only make such purchases as a last resort, as it would force companies to make huge changes to the production process, including design and software.

The global tech supply chain is feeling the impact of Chinese lockdown

The tech sector globally is currently feeling the impact of the coronavirus, with companies closing offices, stores, and factories in China, as well as restricting employees from nonessential travel to the country. The closures, which were initially expected to last through the Lunar New Year holiday week in late January, were soon extended to February 10th. Officials in some provinces and districts are now telling companies not to resume work until 1 March. If the Chinese lockdown continues, the entire tech global supply chain will be affected. This may cause many companies to rethink their strategies and reduce dependence on single markets. 2020 will likely see efforts to further diversify investments across geographies to mitigate risks.