Chip shortage hitting entry-level smartphones the most

Popular entry-level offerings from leading smartphone brands such as Redmi, Oppo and Vivo, are in short supply across India, has found. Several retailers blamed the global semiconductor chip shortage for the unavailability of budget phones, forcing many brands to either increase prices of popular budget phones or entirely shift their focus towards those models where profit can be made.

“For the past six months, we have not been getting supplies of budget phones from Mi, Oppo, Vivo and Samsung,” said the store manager of a Delhi-based retailer who did not want to be named. The phones that are hard to come by in retail stores are the ones priced between Rs 7000 and Rs 10,000, which are aimed at entry-level consumers or first-time smartphone users. “There was a time when we used to get 10 units of a popular phone model and now we are not getting a single unit,” the manager said, adding that a popular Chinese smartphone brand has put out a condition that if we sell a certain number of its mid-range phones and if we meet the target, then only the company will restock in-demand budget phone models.

“There was a time when brands put pressure on us to sell a phone costing Rs 7000 now that same phone is unavailable for Rs 8500. I haven’t seen this situation before,” another retailer told

Employees of several specialised retailers dealing in smartphones repeated the story of low stock and infrequent shipments, with little guidance from phone companies as to when things might get back to normal.

The push to sell more smartphones over Rs 12,000 can be clearly seen when consumers visit Xiaomi’s online store. (Screengrab/Xiaomi India online store)

The current chip shortage has disrupted the supply chain and smartphones are affected by it, especially low-end models that don’t necessarily generate cash but help increase unit sales for the brand. “We are getting supplies of all Samsung smartphones, except for those priced on the lower side,” a retailer told “Due to the chip shortage, a company like Samsung wouldn’t want to make a Rs 5000 phone but rather invest in those models that generate profit.”

The retailer, who deals in multiple brands, admitted that the big phone companies have recently shifted their focus to selling smartphones costing over Rs 12,000 due to a change in business strategy in the wake of chip shortage.

The push to sell more smartphones over Rs 12,000 can be clearly seen when consumers visit Xiaomi’s online store. The brand now promotes its Redmi smartphones starting at Rs 12,499, although several low-end phones are still listed on the site but remain out of stock including popular models like Redmi 9A and Redmi 9A Sport.

In fact, earlier this month, Xiaomi had increased the price of Redmi 9A and Redmi 9A Sport by Rs 300 and even the more expensive Redmi Note 10 series blaming the chip shortage. In recent months, major smartphones like Oppo and Vivo have also increased the prices of their mid-range phones in India. Clearly, subsidised price points are no longer sustainable.

“Because of the semiconductor shortage, the priority is given to more expensive chipsets, where you can earn more revenues. This is why the low-end smartphones which fall in the sub-$150 price bracket have been impacted the most, given the current supply,” explained Rushabh Doshi, Canalys Research Director.

Doshi said the costs of chipsets have gone so high that the only way to sustain the business is to use those chips in models that are priced in the range of Rs 15000 to Rs 20,000. According to Doshi, most brands still want to release low-end phone models but right now their priority is shifted to more expensive models.

Smartphone shipments in India fell 5 per cent year-on-year in Q3 2021 to 47.5 million units as phone companies struggled with supply issues for low-end models, according to Canalys.

“Smartphone prices have increased in the range of 7 per cent to 10 per cent in the past year or so,” reiterated another store manager at a Delhi-based specialty mobile retailer, adding that margins are getting thinner. The same manager also highlighted the long-discussed issue of preferential treatment given to online retailers by providing them with more units compared to physical retailers.

“When you look at unorganised labour which is kind of the core market for Xiaomi’s low-end smartphones, a lot of the informal labour has been greatly impacted by the pandemic. Those people are not really upgrading their smartphones, they are sticking to the old smartphones, which is why you will see less demand at the lower end,” Doshi said.

While players like Xiaomi are more exposed to chip shortages due to its focus on the low-end of the smartphone market, the truth is that entry-level phones cost more than they used to be a year before. “The entire market is shifted upwards,” Doshi explained. “Consumers are slowly moving into the high-end of smartphones because they are realizing that they can do much more by spending incrementally $100 more on a phone.”

Doshi says brands like Apple and Samsung have done daily well despite chip shortage issues primarily because they are vertically integrated compared to Xiaomi, Vivo, or Oppo. “Apple has come out of this pandemic very strongly,” Doshi said, adding that the company realised way in advance that people will not spend more money on a new device and their current pricing reflects that. Apple’s long relationship with TSMC and the fact that the Cupertino giant designs its own chips also helped the company in tackling the semiconductor shortage. What also favors brands like Apple and Samsung where Xiaomi or Vivo fall flat is their stronghold on the supply chain as well as other product categories to make money. In the past year, Apple’s Mac business has shown growth whereas Samsung made strides in the tablet business.

xiaomi smartphones, redmi phones, chip shortage, Redmi 9a, Vivo smartphones, Oppo, iPhone 13, Samsung phones, semiconductor shortage Smartphone shipments in India fell 5 per cent year-on-year in Q3 2021 to 47.5 million units as phone companies struggled with supply issues for low-end models, according to Canalys.

So which brands are more vulnerable to chip shortage? “The ones that are being impacted are definitely vendors who have a lot of the low-cost smartphones than the ones that have expensive phones, where they’re able to kind of digest those additional costs of chipsets,” he added.

There’s a lot to learn from the pandemic and the ongoing chip shortage. Doshi predicts consolidation in the retail space as a lot of retailers would exit the market, given the fact that there has been the prolonged impact of pandemic lockdown, and then now supply chain issues. Because of the current market scenario, physical retailers are at the lower end of the priority list when it comes to getting supplies. However, Doshi warns that vendors need to be mindful of that because consolidation in the retail space is only going to hurt them in the long run.

“Managing offline vs online ratio has been the biggest challenge for vendors right now,” Doshi said. While offline retailers are essential for their expansion in India, the share of online sales has gone up during the pandemic. “I think the reason why there’s so much uncertainty in the market, not just online but also offline is because vendors themselves don’t know how much supply that they can get, and how much they can produce.”

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