Monday, May 20, 2024
Smartphone news

A challenging year for the Indian smartphone industry, Telecom News, ET Telecom

It is the last quarter of 2023, and the right time to understand the what, how and why of the year related to smartphones, and what to expect from 2024.

The smartphone market size in India in terms of shipments was 153 million numbers in 2019 as per IDC. Post COVID in 2020, except for 2021 when “revenge buying” was given as a reason for a growth to 160 million numbers, the shipments have not crossed the 150 million number mark. Actually, the market declined by 10% in 2022 over 2021, and is expected to show a further decline in low single digits in 2023. In any case, the number will not cross 150 million. Various reasons like economic conditions, longer replacement cycle,s etc. have been given for the decline.

The sub Rs. 10k segment, the biggest segment till 2021 as per research agencies is showing the maximum decline. On the other hand, it is being said that the contribution of the mid-premium and premium segments has been increasing. If overall economic conditions are an issue, the mid-premium and premium segments should have also been hit. Some would say the hit would be more than in the sub-Rs. 10k segment.

To me the decline in the sub Rs. 10k segment and the increase in the higher price segments has more to do with the K-shaped economic recovery in India post-COVID- the income of the low and low middle-income population decreasing and that of the upper middle and the high-income people increasing.

The low and low-middle-income groups who are typically feature phones and sub-Rs. 10k smartphone customers are a considerable percentage of the population. A decrease in their income would adversely impact their decision to buy a new phone unless absolutely necessary. This can be seen from the weak response to sub-Rs. 10k smartphones from Jio, Xiaomi and Realme. The 250-odd-million feature phone customers now have a choice in the Jio 4G phone at Rs 999 and will not upgrade to smartphones in these tough times. The others who are using sub-Rs. 10k smartphones would like to push back their buying decision as much as possible.

The ones in the upper middle income and the high-income group have gained economically, and are willing to spend in replacing their existing phone with an upgraded version, hence moving from mid to mid-premium and premium segment.

According to me, things are not going to change drastically in 2024, which means while everyone sees 5G as a key driver in getting smartphone shipments on a growth path in 2024, I don’t see it happening as the decline in volumes in the sub Rs. 10k segment with a high customer base cannot be offset by the increase in volume in the mid-premium and premium segment which has a smaller customer base.

continued below

Some pertinent points here given the K -shaped recovery for the upper low and low mid-income customers -the users of sub Rs 10k phones.

  1. To an existing 4G smartphone user, what is the extra benefit in buying a new 5G smartphone under Rs. 10k in terms of use case, when his economic condition is not getting better.
  2. Customers already buying mid and premium smartphones will not switch to lesser brand value 5G smartphones just because the price is below Rs. 10k.
  3. The last lot of real low-income feature phone customers have a choice in the Jio 4G feature phone. They cannot spend even Rs. 4k for a smartphone.

To put things in perspective only Tecno and Infinix have found some success in this segment this year while even brands like Xiaomi and Realme struggled. Even Tecno and Infinix will have to move up the price ladder sooner than later.So, for all banking on the sub-Rs. 10k price segment, the suggestion would be to move to the Rs. 10-20k price segment and above with 5G-only devices to stay relevant in volumes. One can take the first mover advantage of being the first 5G brand under Rs. 10k today but the volumes would be low for reasons explained above.

The premium segment will grow but one can expect Apple to take away a major share of this growth with the decreasing price difference between premium Android and Apple devices and Apple’s aspirational value. It would be best for the Android brands to play majorly in the mid, and mid-premium segments for volume with a presence in the premium segment for brand image. The year 2024 could see Apple rising as the Brand No. 1 in value sales beating Samsung with the growth in the premium segment.

Keeping in mind the above playing in the sub Rs. 10k segment does not look like a good idea to me if one is looking at top line, or for that matter bottom line. The approach to 2024 has to be built around well-designed products and different form factors in higher price segments and that would require a lot of brands to change their positioning which will not be easy with brands like Vivo, Samsung and Oppo having established themselves strongly there.

(Views expressed are personal)

  • Published On Oct 6, 2023 at 11:00 AM IST

Most Read in Blog

Join the community of 2M+ industry professionals

Subscribe to our newsletter to get latest insights & analysis.

Download ETTelecom App

  • Get Realtime updates
  • Save your favourite articles


This website uses cookies. By continuing to use this site, you accept our use of cookies.