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Cost up for handset makers as rupee slips

NEW DELHI: The fall in the value of Indian rupee to almost 69 against the US dollar has raised input cost for handset makers that import most of the components from China or elsewhere. But most brands are wary of increasing prices due to the fear of losing share in an intensely competitive market.Market insiders said an immediate increase in prices of existing models may be unlikely due to intense competition, but some brands may decide to factor in the rising costs in prices of upcoming models.On the positive, such currency fluctuations could lead to a further push for Make in India."Companies are evaluating price increases between 1% and 2.5%, but not going ahead yet," said Pankaj Mohindroo, president of Indian Cellular Association. "There is a varying impact on different sections of the industry. Sections operating on very thin margins are deeply concerned with the rupee depreciating by nearly 4-5%," he said.Industry insiders said Xiaomi has lesser elbow room to absorb the rise in inputs costs due to the rupee fall than its rivals in the top five – Samsung, Oppo, Vivo and Lenovo – since the market leader already operates on wafer thin margins. In fact, Xiaomi had increased prices of Redmi Note 5 Pro and Mi LED TV 4 55-inch by Rs 1,000 and Rs 5,000 respectively, in April owing to rupee depreciation.The Chinese firm did not comment on the issue as of Friday evening.For Indian brands like Lava, Karbonn, Micromax and Intex, which have rapidly ceded market share to their Chinese rivals and now together hold less than 10% share of the market, the situation is worse — they are being squeezed by the rising input costs but any rise in prices may hurt their market shares even more.Nidhi Markanday, director at Intex Technologies, admitted that the rupee depreciation will impact input cost."If the rupee value keeps on increasing vis-a-vis the dollar in the coming days, we will be forced to take the unavoidable step of raising our prices and passing the burden on to the consumer," she said.A senior executive at Karbonn Mobiles said, "Prices may go up by 8-10%, because after (the dollar reached) Rs 63.50 no one changed prices, but now it's difficult to absorb any further." The person, who requested not to be named, said the company’s new model scheduled for launch in August will have a higher price than thought earlier.Navkendar Singh, associate research director at International Data Corporation (IDC) India, said most vendors may not be able to raise prices now because of intense competition, especially in the second half of the year which is more than 60% of the India smartphone market in terms of consumption, mainly due to the festive season in the October-December quarter.Analysts said handset makers will be forced to focus on assembling more components locally to absorb any future currency fluctuations."We expect acceleration of SMT (surface mounting technology) set ups, so that impact of worsening rupee can be less severe going forward," Singh said.Firms such as Samsung, Xiaomi, Oppo and Lava have started locally assembling printed circuit boards (PCBs), which make up 50% of a smartphone’s making cost, while some others like Vivo and Micromax plan to begin this higher level of manufacturing locally within the next couple of months.

Source: ET

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