Why Feature Phones May Become More Expensive Soon

Prices of feature phones are expected to rise up to 5 percent soon as decline in supply of key components from China following closure of some factories is jacking up material costs, industry players said.

Mobile phone industry body Indian Cellular Association (ICA) expects prices to increase by 3-5 percent as key components such as display and batteries are turning dearer.

"Display and battery are two main components of feature phones. As a result of consolidation in China there is pressure on supply and price of these components," ICA National President Pankaj Mohindroo said.

Industry data shows that despite surge in shipments of smartphones in the country, around 60 percent mobile subscribers are using feature phones. As per Trai data, the number of mobile subscribers was 82.6 crore as on April 2016. The prices of feature phones start from around Rs. 500 and go up to around Rs. 4,000.

MTech Mobiles Managing Director Vivek Agarwal said that prices of LCD screens have nearly doubled due to closure of some glass factories in China.

"Material unavailability is impacting the market. Due to huge competition mobile players are paying more for the materials," he said.

Agarwal also said that economies of scale in China seems to have been impacted due to increase in mobile manufacturing in India. Closure of plants is putting pressure on sourcing components from China which is going to impact the prices. "The companies would need to increase their prices by 5 percent at least to sustain their profits," Agarwal said.

MTech has a mobile manufacturing unit at Baddi in Himachal Pradesh and it produces 3 lakh handsets every month. "Feature phone market, though quite big, is going through hyper competition. Margins are down to zero or negative if supply is not tied up. Display and batteries are particularly firming up. We should see prices firming up by 3-5 percent at least for survival," Mohindroo said.

According to ICA, price of LCDs has increased by 5-8 percent, of batteries by 2-3 percent and of memory cards by 2-3 percent.

Feature phone maker itel Mobile said major shortage is in LCDs which will lead to price increase.

"Major shortage is in LCD glass. The cost impact is close To Rs. 60-80. itel will increase the price between Rs. 30-50 in selected feature phone models," itel Mobile CEO Sudhir Kumar said.