- Indian smartphone volumes dropped about 25% in January due to rising RAM prices
- RAM prices have tripled since August, driven by high AI-related demand globally
- Smartphone prices are expected to rise through FY27 due to ongoing RAM shortages
There could be tough days ahead for Dixon Technologies Ltd. and other smartphone makers in India as the industry grapples with low volumes on account of surging RAM prices worldwide, according to a latest note from CLSA.
The brokerage firm highlights that Indian smartphone volumes have remained under pressure, notably seeing a both sequential and yearly downturn of around 25% in the month of January. This could be attributed to memory prices, which have surged unceremoniously since August of last year.
NDTV Profit reported in September that RAM prices have tripled compared to earlier levels on account of an unprecedented AI-led demand that forced RAM manufacturers to cater to large AI companies rather than allocating inventory to retail or other sectors. This has had a direct impact on both consumers and retailers.
Now, the impact has trickled down to the smartphone industry, leading to a cost increase for phone manufacturers. Earlier in the year, Nothing CEO Carl Pei admitted that smartphone prices are set to increase this year as a result of the RAM shortage, which may continue at least until FY27.
This surge has led to availability concerns, driving a 8% ASP increase since September. CLSA notes that Motorola, Transsion, Oppo and Realme, all of whom are key customers of Dixon Tech, have seen a 20% to 68% of yearly volume decline. This doesn't bode well for the company, raising concerns about meeting FY26 guidance as well as FY27 growth estimates.
Pricing pressure remains accentuated, particularly for entry-level phones, due to memory price rises. Getting enough memory allocation remains a priority for cloud service providers versus smartphones and PCs. And while easing of Press Note 3 approvals and HKC JV are positive, they are already in consensus estimates.
Easing of memory prices and consummation of Vivo JV are the key catalysts to watch, therefore, are going to be key catalysts to watch for Dixon Tech. New growth avenues would also be crucial for Dixon in the medium term, CLSA adds.
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