Mass loses appeal: In India's smartphone market, premium means business

Pricey devices shape industry as shipments for the popular segments decline

Value up, volume down: that is the way the Indian smartphone market is headed, for now. Premium smartphones will shape industry growth as shipments for the mass segment decline, say analysts.

The market made 144 million shipments, a proxy for sales, in 2022: the lowest since 2019 and a decline of 10 per cent year-on-year (YoY), according to data from the International Data Corporation (IDC), a market intelligence company. Business shrunk primarily due to a 54 per cent YoY decline in the entry-level segment, also known as the mass segment (sub-$150 or Rs 12,000).

As shipments declined in the overall market, the premium segment grew in 2022. “The mid-premium and premium price segments of $300-500 (Rs 25,000-40,000) and $500+ (Rs 40,000) grew by 20 per cent and 55 per cent respectively, while the sub $300 (Rs 25,000) has declined by 15 per cent YoY,” said Upasana Joshi, principal analyst--mobile phones at IDC Asia Pacific. “The market (for) above $300 (smartphones) is now 16 per cent as compared to 11 per cent a year ago.”

Analysts reckon the premium segment is growing due to the rising average selling price (ASP) of smartphones. The ASP—the average price at which smartphones are sold across markets regardless of price segment—stood at a record $224 last year, rising 18 per cent YoY.

“Over the last few years, the (smartphone) market has predominantly been driven by the upgrade segment. And the premium range, especially the mid-premium range, is emerging as one of the preferred avenues to enter this segment,” said Faisal Kawoosa, founder and Chief Analyst at Techarc, a research firm. “The market has somewhat stagnated in terms of volume at 150-155 million units. However, the premium segment is offering growth in terms of value.”

New launches in the premium segment have gone up compared to entry- or medium-level smartphones. “Due to lower margins in this (low) price segment, fewer vendors are keen on launching devices in this segment, compromised for key feature sets with low demand,” said Joshi.

Smartphone companies are focused on premium segments where they sell fewer units but get higher revenues. Consumers are getting purchase options like EMI, cash backs, and trade-ins, contributing to the shift to premium bands.

Apple and others

Apple leads the high-end smartphone market in India, both in terms of overall shipments as well as market share, ahead of Samsung and OPPO. The US company led in the over-$500 smartphone category last year, securing a 60 per cent share. Apple iPhone 13 becoming the third most shipped device in 2022.

Apple has been in India for the last 25 years, but only recently started expanding its retail footprint. It opened two retail stores in Mumbai and Delhi last week, indicating its ambitions in the Indian market.

The firm’s premium smartphone shipments grew from 1 million in 2018, when it was behind Samsung and OPPO (of which OnePlus is a subsidiary), to 4.7 million in 2021, before touching 6.3 million in 2022, according to data from IDC.

In contrast, Samsung’s shipments stood at 2.2 million, while OPPO’s were 1.2 million last year, both commanding a 21 per cent and 12 per cent market share respectively.

“Going forward, many Android brands will try to capture a bigger piece of the premium pie. However, Apple is currently in a prime position to grab a much larger base,” said Prachir Singh, senior analyst at Counterpoint Research, a technology market research firm.

Apple India does not offer discounts but has financing options, such as no-cost EMIs, for iPhones. “There will be competition, but Apple is in the lead with its brand image and financing options,” he said.

Price matters

To compete with Apple, competitors need to re-strategize. Brands must make their products aspirational and offer differentiation, say analysts.

Apple’s chief rival Samsung has an edge in the ‘foldable’ smartphone category. Of the 144 million shipments in 2022, almost half a million devices had a foldable form factor – either flip or fold devices, mostly via Samsung. This year newcomers like vivo are also expected to launch foldable offerings.

China’s Tecno, which is known for its entry-level offerings, has already taken a plunge into this realm by way of its Phantom V Fold. The device was launched earlier this month at a hefty price tag of Rs 77,777.

Analysts say that proper pricing for foldables will be a tricky ordeal. The challenges, however, do not end there.

“Foldable smartphones are an interesting as well as refreshing new form factor. But the sense I am getting from consumers that are using one is that the excitement of using a fold phone is getting over,” Kawoosa said. “We are expecting foldables to remain an ultra-niche consumer segment. We are not expecting India to sell more than 375,000 units in 2023.”

Furthermore, analysts maintain that this new form factor alone cannot give a fillip to the premium market.

The premium segment will expand but cannot be the only growth driver for the smartphone market, analysts say. A majority of the market still lies in the sub-$300 (Rs 25,000) category, which is anticipated to remain flat, or decline, in 2023.

According to Counterpoint’s Singh, customers looking to purchase premium smartphones are still price conscious.

“Although the volumes for premium smartphones have been on the rise recently, if you look at the overall quantum of these volumes, it is still very low. This segment is a value driver but there is still time for it to become a volume driver,” he said.