MC EXCLUSIVE Smartphone demand weakens as Iran–Israel tensions hit retail footfall

Joshi added that while retailers often cite global geopolitical tensions for rising prices, the primary driver remains the sharp increase in memory component costs.

• India's smartphone sales fall due to global tensions, LPG concerns
• Retailers see fewer visits and delayed buying decisions
• Shipments may fall 13–15 percent in 2026, prices set to rise

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While consumers are flocking to stores to buy induction stoves following reports of LPG shortages amid the ongoing conflict involving the US, Israel and Iran in West Asia, footfall at mobile retail outlets has dropped sharply since the Iran–Israel conflict escalated. Smartphone demand has weakened noticeably across the country, with retailers reporting fewer store visits and softer sales, a trend analysts say could translate into a significant decline in shipments during the January–March quarter.

Retailers who would typically move a full month’s inventory say footfalls have softened and purchase decisions are being delayed, particularly in the mid-range and premium segments, as consumers grow cautious amid global uncertainty.

All India Mobile Retailers Association (AIMRA), which represents nearly 1.5 lakh retailers across the country, said that since concerns over LPG availability and the Iran conflict intensified, consumers have begun prioritising essential household purchases over discretionary items like smartphones.

"Products linked to daily needs—such as induction stoves due to gas worries, and cooling appliances like air conditioners and refrigerators as summer begins—have moved to the top of consumers’ buying priorities. Smartphones, by contrast, are being deferred because most users already have functioning devices and phone lifecycles have become longer, especially as prices have risen," Kailash Lakhyani, founder chairman of AIMRA, told Moneycontrol.

As a result, he said, retailers are seeing the early signs of demand slowdown in the smartphone market. While brand shipment numbers may still appear stable because inventory continues to move through the distribution channel, actual sell-out to end consumers has weakened. "This impact is already becoming visible in the market and is likely to show up more clearly in the current month’s sales performance."

Upasana Joshi, senior research manager, Devices Research at IDC Asia Pacific, said the year began on a weak note. January shipments fell to roughly 8 million units, and the sluggish trend likely continued through February as the broader mobile ecosystem struggled with persistent cost pressures. Early data suggests a sharp drop in first-quarter performance, with total shipments estimated at 27–28 million units, down from 32 million in the same period last year, according to IDC data exclusively accessed by Moneycontrol.

“While the first quarter typically sees a cyclical dip following the heavy year-end festive season, the current decline is particularly severe. Beyond the usual reduction in retail footfall, the market is grappling with broader macroeconomic factors and essential price hikes,” Joshi said.

Retailers across major cities are noticing consumers cutting back on spending, with sales dipping to nearly two-thirds of the usual. Inflation fears and economic uncertainty are clearly affecting buying patterns, Faisal Kawoosa, founder analyst at TechArc, told Moneycontrol.

“Exports are also feeling the pinch, especially to markets like the UAE, Iran, and Ukraine, where iPhone traders are facing fresh hurdles amid global trade restrictions. The industry is bracing for a rough patch unless tensions ease soon,” Kawoosa said.

Tarun Pathak, research director at Counterpoint, told Moneycontrol that their weekly offline audits show a 28 percent decline in footfall, compounded by a reduction in promotional activity compared to last year. “We are bracing for the most challenging second quarter since the 2020 pandemic,” Pathak said.

Joshi added that while retailers often cite global geopolitical tensions for rising prices, the primary driver remains the sharp increase in memory component costs. This technical factor is frequently overshadowed by broader geopolitical narratives, leaving many consumers unaware of how supply chain costs—along with a weakening currency—are pushing device prices higher.

At the same time, the industry is bracing for higher import costs as the ongoing global energy crisis pushes up air freight expenses. With a significant portion of smartphone components shipped by air, manufacturers and distributors expect logistics costs to rise, adding further pressure on pricing and margins at a time when demand is already slowing.

Kawoosa said supply chains are likely to face additional strain as rising oil prices push up airline fuel costs, making air imports of smartphone components—over 95 percent of which arrive through Delhi and Bengaluru—more expensive.

“Air India has even added a Rs 400 fuel surcharge for domestic travel, hinting at costlier logistics. This means higher smartphone prices are on the horizon,” Kawoosa said.

Pathak added that the industry is facing multiple headwinds, including a projected 50 percent surge in memory costs and growing consumer uncertainty driven by the Middle East conflict and rising energy and fuel prices. “The smartphone segment should prepare for a very difficult April–June period,” Pathak said.

The slowdown is compounding an already worsening outlook for India’s smartphone market. After a largely flat 2025, annual shipments are now projected to plunge 13–15 percent in 2026, even as the industry grapples with rising costs and supply-side pressures.

IDC estimates suggest smartphone shipments in India could decline by 13–15 percent this year, falling from the 152 million units recorded in 2025. As production costs rise, the average selling price of devices is expected to increase by more than 15–20 percent, making smartphones notably more expensive for consumers, Joshi said.