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Smartphone prices in India are rising. Blame the weak rupee

The biggest seller of smartphones in India says it is having to hike prices because of the slump in the valu...

Posted: Nov 12, 2018 11:34 AM
Updated: Nov 12, 2018 11:35 AM

The biggest seller of smartphones in India says it is having to hike prices because of the slump in the value of the country's currency.

Chinese electronics firm Xiaomi raised the prices of several of its new products on Sunday, citing the sharp fall in the Indian rupee this year as the main factor behind its decision.

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"[The] rupee has depreciated against the dollar by nearly 15% since the beginning of the year, which has resulted in a significant rise in input cost for us," the company said on Twitter.

Xiaomi added 500 rupees ($7) to the cost of its Redmi 6 smartphone and 600 rupees ($8) to one of its Redmi 6A variants — an increase of about 6% and 10% respectively.

Those models now cost between 6,599 rupees ($91) and 8,499 rupees ($117). That's less than many rival products but still out of reach for hundreds of millions of Indians, who earn an average annual wage of less than $2,000.

The lack of cheap smartphones has been a major barrier to bringing India's roughly 900 million unconnected citizens online — creating an opportunity for keenly priced providers such as Xiaomi.

India's rupee has been one of the world's worst performing currencies this year, hitting a series of record lows against a rising dollar. Higher oil prices and concerns about a possible economic slowdown have contributed to the decline.

Xiaomi has risen rapidly to the top of India's smartphone market — the second-largest in the world behind China — by making its smartphones more affordable than competitors such as Apple (AAPL) and Samsung (SSNLF). The Chinese firm sold more than a quarter of India's smartphones in the three months to September, according to industry estimates.

Analysts say other players in India are likely to feel the impact of the falling currency as well. Realme, another Chinese brand, also announced it would hike the price of two smartphones by around 6% and 14% respectively.

"The falling rupee is going to impact prices," said Rushabh Doshi, an analyst at research firm Canalys. "Vendors like Xiaomi who operate so close to cost are definitely going to be the first ones who are going to be impacted."

Bigger brands like Samsung, Xiaomi's chief rival in India, have the advantage of a wider global reach and revenues in several currencies, including the US dollar. Meanwhile, the currency of Xiaomi's other big market and home turf — China — has also dropped sharply this year.

"For Xiaomi, its major business is in China and India so it operates in the renminbi and Indian rupee — both of which have fallen against the US dollar," Doshi said, adding that the company buys many of its components in dollars. "So it is very important for them to start correcting their prices."

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