Smartphone growth accelerates in India
Tejas Kounder was sitting outside his tiny, ramshackle house in Mumbai playing Candy Crush on his phone.
His home gets running water for only 20 minutes a day, does not have a toilet, and is just 3 metres by 2.5 metres in size. But the 15-year-old and his two brothers have smartphones. Tejas’s phone, made by the Indian manufacturer Xolo, costs 6,800 rupees (Dh406), although he bought it from a friend second-hand a few months ago for 2,000 rupees. His father, a fisherman, earns 30,000 rupees a month.
“He paid for the phone,” Tejas said, as a hen was pecking around his feet in search of food. “I’m really pleased with it. It’s great that I can chat with my friends on WhatsApp.”
India’s smartphone market is one of the fastest-growing in the world.
Smartphone sales in the country increased by 84 per cent in the second quarter of this year, compared to the same period last year and rose by 11 per cent over the previous quarter, according to figures from IDC, a market intelligence firm. A major driver of this increase has been the rise of Indian mobile manufacturers, which are in a race to offer cheaper smartphones. Jivi Mobiles, based in New Delhi, for example, last month launched a phone which the company describes as the country’s cheapest Android smartphone at 1,999 rupees. Karbonn, one of the biggest smartphone manufacturers, offers an Android phone for 2,699 rupees.
The potential for further growth in the smartphone sector remains high, with 71 per cent of the market still using feature phones, and the market is likely to double between now and 2018, according to IDC.
Narendra Gada, who runs the Orbit mobile phone store in Colaba in South Mumbai which opened 13 years ago, has been a beneficiary of the trend.
“Now all the categories of people in Mumbai are having smartphones – lower to the upper,” he says, explaining that his shop experienced a growth of 40 per cent in smartphones sales so far this year compared to last year.
One reason for this rise in sales is that Indians simply want to have access to the features that smartphones offer. But what makes that possible for many is the fact that there are many more affordable options available, he adds.
Last year, the cheapest smartphones he sold were about 7,000 rupees.
“We have smartphones for 3,000 rupees now,” he says. “They’ve definitely come down in price.”
The shops sells a range of international brands, including Samsung and Motorola, as well as branded phones made in the country. But it is the Micromax Unite, a 7,000 rupee Indian phone, which is the shop’s biggest seller, Mr Gada says.
Data released in August by IDC for the second quarter of the year showed that Samsung was the market leader with a 29 per cent share of the smartphone market, while Micromax was in the second place with 18 per cent. It was followed by two other Indian companies which produce budget smartphones – Karbonn, which had an 8 per cent share, and Lava, with 6 per cent.
“While Samsung has held on to its leadership position in the market, it is noteworthy that Micromax is growing faster,” according to Jaideep Mehta, IDC’s vice-president and general manager for South Asia. “Samsung needs to continue to address the low end of the market aggressively, and also needs a blockbuster product at the high-end to regain momentum. Given the current growth rates, there is a real possibility of seeing vendor positions change in the remaining quarters this year.”
Ankur Bisen, senior vice-president for retail at Technopak, a consultancy, explains that the country has a vast mobile phone user base at about 800 million.
“As a result, the entire smartphone consumption that is happening is the mass migration from feature phones to smartphones of this user base,” he says. “That is giving smartphone growth not only a healthy growth rate, but also large volumes.”
He points out that there is also a clear trend of “polarisation” in its smartphone market.
“It’s polarised in the sense that you have high growth in very expensive categories led by iPhone and certain other models, and on the other side of the spectrum, are mass smartphones between the $50 to $100 price points. The inbetween market is sort of struggling for growth. I’m not saying that it’s not selling, but somehow growth has not been as one would have anticipated.”
This was reflected in the surge in demand for Apple’s iPhone 6 released in the country a couple of weeks ago. A number of stores sold out of their stock on pre-registered orders before the phones had even arrived in the country. The sleek, high-end phones, are priced at between 53,500 rupees for the 16GB iPhone 6 and 85,000 rupees for the 128GB iPhone 6 Plus.
Another brand that has been flying off the shelves is Xiaomi, described as China’s answer to Apple. Its models on sale in India are priced at 5,999 and 13,999 rupees. The demand has been so huge, with the company predicting that it would sell about 100,000 units a week in the country last month, that it is considering manufacturing handsets in India.
“For the Diwali month we’re chartering planes from Hong Kong to India to bring in [Xiaomi’s] Mi 3 and Redmi phones because it’s too much product,” Hugo Barra, the company’s international vice-president, said ahead of the festive season in India, according to a Reuters report.
Xiaomi’s entry into India has not been entirely easy, however. With ongoing border disputes between China and India, the presence of China’s largest smartphone company became a national security concern. Reports in the local media said that India’s air force warned its employees against using Xiaomi phones because of the security risks. The company denied that it collected data without permission and has said it plans to set up a data centre in India to allay concerns about privacy.
Competition among manufacturers is becoming ever fiercer, as local and international companies compete for a bigger share of the market. “There are many regional players who have occupied that [low-cost] space as head-on competition to established players such as a Samsung or a Sony,” says Mr Bisen. “So established players are finding it difficult to compete at these price points. You have a mix of Indian and Chinese brands trying to occupy this space. Established players are struggling to deliver a feature-packed product at a $100 price point.”
Google in September launched its Android One project in India. It has teamed up with Micromax, Karbonn and Spice to build high-quality affordable Android phones optimised to run its system at a price of about 6,399 rupees. Google wants to ensure that it capitalises on the low-cost smartphone boom in the country, aiming to increase internet usage.
For many Indians, their only access to the web is via their smartphones, as they might be unable to afford to have a computer at home.
Tejas, who did not have access to the web at home before getting a smartphone, explains that apart from being a fun device for playing games and chatting with his friends, it also helps him access information for his studies. “I can’t really imagine not having a smartphone now,” he says.
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