Ukraine invasion: Russian consumers rush to snap up Chinese smartphone stocks as the rouble’s value sinks
Major Chinese Android smartphone brands are seeing robust demand this month in Russia, boosted by increased local consumer spending on essential electronics devices, as international sanctions against the invasion of Ukraine sent the rouble in free fall.
“Russian retailers are setting the price higher every few days to make up for the exchange loss,” said Ivan Lam, Hong Kong-based analyst at Counterpoint Research. “People are buying everything from smartphones to home appliances before the currency further depreciates.”
Sales of smartphones from Huawei Technologies Co, Oppo and Vivo significantly increased in the first two weeks of March, according to a report by Russian daily newspaper Kommersant on Wednesday, citing data from the country’s largest mobile network operator MTS.
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The number of Huawei smartphones sold during that period was three times more than the previous two weeks, the report said. Sales of Oppo and Vivo devices surged 200 per cent in the same period, while those of ZTE Corp and Realme grew 100 per cent and 80 per cent, respectively.
A woman walks past a board showing currency exchange rates of the Euro and the US dollar against the Russian rouble in Moscow, Russia, on March 11, 2022. Photo: Reuters alt=A woman walks past a board showing currency exchange rates of the Euro and the US dollar against the Russian rouble in Moscow, Russia, on March 11, 2022. Photo: Reuters>
The brisk sales, however, signify panic buying because of the weakening rouble, rather than increased local preference for Chinese smartphone brands, according to Counterpoint’s Lam. The rouble was trading at 104.47 to the US dollar on Thursday.
Lam said the recent hefty sales numbers recorded by Chinese smartphone vendors are likely to decline soon, as many distributors in Russia have stopped making large imports from China because of exchange rate risks.
Before that two-week period in March, total smartphone sales in Russia increased fourfold from February 24 to 28, compared with the previous four days, according to the Kommersant report. At the time, Apple‘s iPhone and Android smartphone models from Samsung Electronics and Xiaomi Corp were the most in demand in the local market.
Apple, however, halted sales of the iPhone and its other highly prized products in Russia from March 1, following the country’s invasion of Ukraine, saying the company stands “with all of the people who are suffering as a result of the violence”. Samsung also paused its sales in Russia a few days later.
To their advantage, the major Chinese smartphone brands had sufficient inventory in their local warehouses in Russia to meet the increased demand, following Apple and Samsung’s moves to halt sales, according to Arkady Markaryan, head of smartphone business at AliExpress Russia.
AliExpress, a global marketplace for overseas consumers to buy directly from manufacturers and distributors in China, is a major business under Alibaba Group Holding, owner of the South China Morning Post.
But international sanctions on exporting hi-tech products to Russia, including payment and logistics restriction, have created a big challenge for Chinese technology companies that want to keep doing business in the country amid the ongoing war in Ukraine.
Transsion Holdings, a Shenzhen-based budget smartphone maker, recently said that it is relying on yuan payments to maintain its operations in Russia.
Counterpoint’s Lam, however, indicated difficulties with the yuan payment strategy. “The industry is still using US dollars to calculate manufacturing costs and set prices of handsets, so it’s hard to shift to yuan payment any time soon,” he said.
Semiconductors and other crucial components of smartphones are mainly supplied by companies in the US, South Korea and Japan, which all use US dollars to settle international transactions.
Lam said major Chinese brands like Xiaomi, Huawei, Oppo, and Vivo must also consider if the risks of doing business in Russia far outweigh their ambition to expand sales in western Europe, where many people are protesting against the war in Ukraine.
Washington may also impose new sanctions. Last week, US Commerce Secretary Gina Raimondo warned that the US could “essentially shut” down any Chinese companies defying sanctions by continuing to supply chips to Russia.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.
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