Demonetization effects Smartphone prices

New Delhi, January 9: Already we knew about demonetization, which was made by the PM Modi - government of India. Demonetization resulted in the decrements in the cost smartphones to use the digital transactions.

Half of the population don't have smartphones till now.So, the government has asked local handset makers to come up with smartphones costing less than Rs 2,000 that can enable financial transactions, as it realizes its push for a less cash economy won't succeed until affordable devices are made available to the rural areas.

In a meeting held recently by Niti Aayog, the government has asked home-bred handset makers including Micromax, Intex, Lava and Karbonn to build low-cost phones that can take digital transactions to the masses, three people aware of the discussions said. Chinese players haven't been approached for this project while larger multinationals such as Samsung and Apple didn't attend.

"The government has begun enabling digital transactions, which are growing exponentially now, but they realize that there aren't that many low-cost smartphones in the market," one of the three senior industry executives aware of the meeting told ET, asking not to be named.

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"The government's aim is to allow financial transactions from anywhere, devices which should also have the ability to scan for Aadhaar-based financial transactions in the future," the second industry executive said.

Industry insiders though said key challenges will have to be addressed first for the project to get off the ground. Foremost, keeping the cost of the phone low while adding features like a fingerprint scanner, high-quality processors and ensuring adequate build quality.

At present, 3G smartphones are available at starting prices of around Rs 2,500, while first 4G phones start at higher prices. Affordability and use cases are two big factors behind feature phone users being averse to switching to smartphones in the rural areas.

Only around 300 million of India's about a billion mobile phone users have smartphones. Also, rural areas have a Tele-density of just above 50%, compared with over 200% in cities like Delhi, underlining the disparity in mobile phone usage.

Another challenge is the sheer volumes of the phones planned to be sold, which is as high as the combined quarterly smartphone shipments for the industry. Not only will the volumes require large investments, it will also mean an advance inventory pile up instead of demand-based production.

Apple, Samsung, Micromax, Intex, Lava and Karbonn did not respond to queries as of press time Sunday.