India's smartphone industry is currently in the eye of the storm for two major events: A COVID-19 induced meltdown that is estimated to give a $2 billion uppercut to the industry in terms of revenues lost; and the tantalising possibility of more manufacturing migrating from China to India now that an overwhelming reliance on the Chinese has been badly exposed. In other words, India's short-term pain may lead to much needed long-term gains if India can play its cards right.

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After a 27% year-on-year decline in smartphone shipments in March and an expected 60% drop in April, Counterpoint Research estimates an overall 3% decline in smartphone shipments -- from 158 million units in 2019 to 153 million -- for 2020. This predicted drop only takes into consideration India's 21-day lockdown however, with the country being open to further losses if the situation worsens and the lockdown is extended. What this means is that it's difficult to pinpoint how serious the economic impact of COVID-19 could turn out to be.

Despite this, along with India's infrastructural inadequacies, companies like Apple that have been dead against making their phones here historically, have finally capitulated to opening up their manufacturing shops in the country. Its contract manufacturer, Foxconn, has started making the iPhone XR in Chennai and plans to roll out the entire 11 series from India as well, which is a resounding vote of confidence considering the XR is technically far more complex than prior iPhone models. Moreover, contract manufacturers like Foxconn, Flex, and Wistron -- they collectively work for most of the world's smartphone makers -- are already present in India, making smartphones for everyone from Xiaomi to Lava.

With the nationwide lockdown though, which has forced these companies to shut down their factories, the hit to local labour and livelihoods could be catastrophic, especially considering the lack of social safety nets available. In fact, the hit to manufacturers is estimated to be around $2 billion thus far. Phone companies like Xiaomi and RealMe have pleaded with the government to allow them to function as an "essential service" so they can deliver handsets during the lockdown. Xiaomi explained that this was not about generating revenue, but about putting an essential tool in people's hands during an emergency, especially when you consider that at least 40% of phone sales are attributed to first-time buyers. As phone-obsessed as India is, I'm not so sure the government will cater Xiaomi's pleadings.

The irony and tragedy that lies here is last year was when India made some of its biggest strides in wooing phone manufacturing to move south. Lured by cheap labour, the massive local market, and the opportunity to cut hefty import duties, smartphone companies and their contract manufacturers finally started to voyage to India.

In spite of this, a productive way to look at India's manufacturing industry is to realise the urgent compulsion that smartphone manufacturers will now have post-COVID-19 crisis to establish a necessary beachhead away from China. iPhone assemblers like Pegatron, for instance, are currently in active pursuit of an Indian unit. Other manufacturers like Meiloon, which makes speakers for companies like Harman, are also looking to jump ship and set up shop elsewhere.

Make no mistake, no one is going to replace China anytime soon -- the notion of India doing so is almost laughable. But five years from now, who knows how things could turn out. With the right government policies and a huge push towards improving infrastructure, along with the creation of a skilled local labour pool, a new world could arise where India becomes a manufacturing hub.

In a way, thanks to COVID-19, India could become the biggest benefactor of companies wanting to de-risk their China-based manufacturing. A recent UBS report has gone so far as to label India as the leading destination for companies that want to move out of China as India's foreign direct investment doubled in 2019. The migration involved not just smartphones or electronics, but a wide range of industries from food to pharmaceuticals.

"Given India's competitive advantage in terms of land and labour availability, exports has always been a big hope historically but it is now seeing a turn as global manufacturers long settled in China are looking to diversify their manufacturing base. India has scale advantage and key success factors locally are also improving," the report said.

It's a tantalising dream, especially since it's currently hard to accurately gauge the impact COVID-19 will have on India. There's also no doubt that China's humongous advantage of having a manufacturing ecosystem and interlinked supply chains, which took a few decades to build, will still be here after the outbreak ends. But honing in on India, if it wants to replicate what China has, now may be the perfect storm for the country to begin working towards this promise.