Indian rupee has declined over 8.5% in four weeks leading up to 24th September against the US dollar. This steep fall in the value of the rupee is expected to adversely impact the margins of leading global mobile device OEMs operating in India.
Regional teams of global OEMs forecast (and commit) their device shipments months in advance as compared to Indian brands (who have the inventory visibility of only few weeks). Although the global MNCs factor for currency fluctuations, this hedging is generally not more than 1.5%. When the decline is as steep as has been in the recent weeks, then the profit margins of some these players are adversely affected.
Convergence Catalyst believes that among the global players, Nokia and Samsung being the portfolio players will be most impacted by this phenomenon, while HTC, Blackberry, Sony Ericsson and Apple are relatively less impacted as the Average Selling Price (ASP) of their devices are much higher (with better margins built in) and the monthly sales numbers are much lower (compared to Nokia & Samsung).
With the festive season around the corner, these companies cannot afford to pass on their impact to consumers or on to their distribution channel, risking sales. While some companies might selectively increase the price of few models post festive season, the others might launch their new devices at a higher price than originally planned while retaining the price of the existing models, to offset some of their eroding profit margins.
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