Decoding the changing dynamics of the smartphone market in India

The Indian smartphone market is one of the biggest in the world. According to Counterpoint Research, India’s smartphone market revenue crossed $38 billion in 2021 with 27% YoY growth. The infiltration rate of smartphone in India reached 54% in the year 2020. In the year 2021, the sales volume of smartphones reached the highest, despite a slowdown in the global smartphone market due to the pandemic.

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Though in recent times, the Indian smartphone market is faced with the ongoing component shortages, as per Counterpoint Research, due to which India’s smartphone shipments declined 1% YoY to reach over 38 million units in Q1 2022.

Giving an idea of the scale of growth, Sandeep Goyal, MD, Rediffusion, said, “India will have 1 billion smartphone users by 2026, driven by the fiberisation of villages under BharatNet and the imminent launch of 5G.”

Undoubtedly, the entry of Chinese smartphone brands in the Indian market has change the dynamics of this market – bringing low-priced handsets loaded with features on one end of the price spectrum and premium high-end smartphones on the other. Chinese smartphone brands dominate roughly 60% of the smartphones sold in India, with brands such as Xiaomi, OPP, Vivo, OnePlus, Gionee, Lenovo, Huawei, along with Coolpad, Phicomm, and Meizu, among others clocking impressive growth.

Lloyd Mathias, Business Strategist and Marketing Expert, noted, “India is the world’s second largest smartphone market with an estimated 493 million users after China. Five brands dominate the market – Xiaomi, Samsung, OnePlus, Realme, Vivo and OPPO. The Indian smartphone market was estimated at $38 billion in 2021 with a 27% YoY growth over 2020, a year that saw a big decline due to the pandemic.”

At the same time, he said, “With the galloping growth of the digital economy and India’s data costs being among the lowest in the world, the growth in smartphones will continue for the foreseeable future.  A lot of the growth will come from the Tier 2 and Tier 3 markets.”

“The rural sector will show a CAGR of 6%, compared to 2.5% for urban in the 2021-26 period. Internet enabled services in all facets of life will propel greater adoption” projected Sandeep Goyal.

Valued at $139 billion in the year 2021, the Indian smartphone market is predicted to expand at a CAGR of 10.5% and by the year 2028, reach $281 billion. In the year 2021, India had shipped around 161 million smartphones. However, due to the second wave of the pandemic, low inventories were resulted across channels in the second half of the year. For large sized electronics manufacturing companies, the government has introduced a production-linked scheme, in order to give a boost to manufacturing which was localised, as market share was lost by many established smartphone manufacturers in India, due to the increasing entry of Chinese brands in the Indian market.

Among these, the market leaders in the smartphone market in India in were Xiaomi, Samsung, Vivo, realme, OPPO, and others.  Xiaomi, which sells phones under the brand names POCO, Redmi, Mi, has emerged as the leading shareholder in the Indian smartphone market. It customises its strategy based on the requirements of the country it is present in, and invests in R&D as well as the domestic distribution network. Among the top five, POCO has emerged as the fastest growing brand in the online arena, with a 51% YOY growth.

There are many factors driving growth for the smartphone market. These include rising disposable income, affordable Internet, evolution from 4G to 5G and the ever growing need for connectivity. Despite a major share of the market coming from low end phones, Korean giant Samsung has decided to stop manufacturing and distributing low end phones in India. According to sources, it is going to introduce smartphones which are majorly above Rs 15,000 moving ahead, with Dixon, its contract manufacturing partner to manufacture the last cluster of the low end phones for the country  towards the end of the year. In the first quarter of the year 2022, the shipment of feature phone has witnessed a 39% on year reduction due to supply constraints, low demand due to rising retail inflation. Samsung’s exit from the low value feature phone market will open up spaces for its competitors in the segment. One of the reasons for Samsung’s decision is the PLI scheme requiring that multinational brands should produce phones above Rs 15,000 (factory price). According to reports India has recorded Rs 1,496 crore worth of exports in the year 2021.

When it comes to consumer behaviour, the three essential elements that Indians look at while buying phones are screen size, brand and battery life. In other Asian markets such as China, Malaysia, Indonesia, and Singapore, one of the three device section criterion is the operating system, while the buyers in Philippines, India, Thailand, may not consider it as significant. Users of smartphone in India are also some of the most receptive users to advertisements on mobile.

Price also plays a major role in influencing mobile phone buying decisions. “The premium segment, which is in the >Rs 30,000 has Apple’s iPhone in the lead, closely followed by Samsung. The big growth driver is the market below the $200 (or Rs 15,500) price segment, which comprises close to 75% of the Indian smartphone market by volume. The average selling prices of smartphones in India is at ~$160 (or Rs 12,500),” informed Lyod Mathias.

He added, “Price is obviously a key driver and brands like Vivo, OPPO, Realme and Xiomi have a good offering of phones in the sub-Rs 15,000 segment.  Tier 2 and Tier 3 markets are very price driven and lower price points play a key role.”

With growing adoption of online shopping, the online platforms today account for 43% market share of the sales of Indian smartphones in June 2020. Among online channels, Amazon has recorded its largest ever share at 47%, while Flipkart was 42% in the June quarter 2020.

According to sources, Chinese servers have an access to the biometric details of numerous Indians through remote access of modems, networks, routers, switches, which are installed and sold by Chinese companies in India.

In the year 2021, the 5G headset’s contribution has been 12% by volume, and the volume of 5G handsets is expected to surpass 40% in the year 2022. The growing expansion of 5G handsets is predicted to drive the market’s premiumisation. The potential of 5G has not been fully utilised and it will be a driving factor of the latest AI driven camera and voice applications.

“5G will be a growth driver only for the premium segment. However, given the ensuing 5G auctions in July, it will be a widely advertised feature and could become a big growth driver for the affordable-premium and premium segments. The big opportunities may come from Tier 2 markets and for phones with customised usage for specific segments – like students,” said Llyod Mathias.

Sandeep Goyal said, “5G will drive fintech, e-commerce, e-health and e-learning. This will give a big fillip to smartphone usage. Consumers are already data hungry. 5G will further add to the appetite.”


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