Smartphone category continues to be the bright spot in consumer technology market as the growth is widespread, sustained and deep. With over 100 million units shipped, India is currently the third largest market for smartphone sales after China and US. It is also, by some distance, the fastest growing market with growth rates in excess of 30%; with both the larger markets at saturation point and sales being driven by replacements only, India’s status as the growth engine of the global mobile phone industry stands unchallenged.
As from the rapid spread of internet services and e-commerce, a major driver of this growth has been the increasingly attractive price-performance equation. New entrants, especially Chinese vendors such as Lenovo, Xiaomi and Gionee, drove down prices while shipping quality devices. The sub R7,500 segment, which contributes two thirds of the total volume, saw the most action in this context and drove the market to migrate away from feature phones towards smartphones. Indian e-tailers enabled consumers everywhere to get access to these devices: in the process, online sales of these devices climbed to almost 30% of total shipments, a doubling of share in just 24 months.
IDC anticipates the continuation of trends such as the demand for larger screens and growth of Chinese (and local) brands. With all major telcos investing heavily in 4G capacity, and a new entrant promising to disrupt the market with significantly lower price points, we expect a major boost to the smartphone market in 2016.
We expect to see at least 6 major trends in 2016.
The year of affordable 4G devices: The 4G growth wave is just around the corner. With smartphone penetration on the rise, expanding 4G networks will contribute to the overall volume heading into 2016. IDC projects that nearly one out of two smartphones sold will be 4G enabled by 2016, which represents a more than doubling in shipment growth over 2015.
Smartphones are expected to pip feature phones market: India is still the largest feature phone market globally. The share of smartphones was around 40% in CY 2015 and given the current trend, smartphone sales would overtake feature phone sales in 2016. Smartphones are now available at as low as $15, cheaper than many basic/feature phones indeed. The popularity of multimedia consumption and social network interactions on phones remain a significant factor during purchase for many first time buyers and that is expected to drive the migration forward.
India will become a hotbed for mobile manufacturing: Post government’s push on ‘Make in India’ and subsequent decision to increase countervailing duty for mobile phones early last year, roughly 40% of smartphones sold in India were manufactured or assembled locally by the first half of 2015. Most vendors still import semi-knocked down (SKD) kits. Government policies and tax structures are expected to change again to encourage local manufacturing, and we expect completely knocked down kits (CKDs) to become more prevalent, thereby taking manufacturing to the next stage of sophistication.
Security will be a key hygiene factor for enterprise-class phones: Massive security breaches of companies are becoming all too common. IDC believes that more companies will begin utilising the biometric security built into both company and employee-owned smartphones to help secure everything from PCs and networks to physical access to buildings. All current-generation Apple iPhones now have fingerprint scanners, and the technology will trickle down to many flagship (premium) Android phones and gradually to mid-tier phones over time. We anticipate smartphones pre-installed with biometric features to be seen on a rise in 2016.
Mobile apps: hyperlocal and vernacular usage will be key: India has one of the largest internet user bases where more than 50% are mobile-only internet users, and the mobile is the primary screen for internet access for more than 80% of internet users. With smartphone penetration of around 20%, IDC anticipates Tier 2 cities and beyond to drive the next wave of growth. It is evident that a majority of users in smaller cities and towns use the Internet in their local languages. And hence it is imperative for vendors to target these first time users with an increased focus on ‘localised’ content.
Similarly, hyperlocal apps connects apps users in target markets with vendors in a mutually beneficial way. And hence they are increasingly looked upon by businesses in creating a personal equation with the targeted audience.
Online share is likely to plateau by 2016-end: The growth spurt driven by the online marketplace model is quite remarkable in India, primarily led by Flipkart, Amazon and Snapdeal. However, online platforms see a majority of their device sales during festive periods: at other times, roughly 67-75% of devices are bought through traditional retail outlets.
Certain vendors have successfully experimented with online-only distribution models as a launch pad into India. With more price discipline looming, vendors going into traditional distribution to drive volumes we expect this advantage to diminish and the online platforms to settle at a 40-45% market share by the end of 2016, and stay there through next year.
Smartphones have driven a silent social revolution in the country. For the first time ever, they have provided an economical method for hundreds of millions of people to access to the magic of the internet. Thereby driving consumption, greater efficiencies in government services, transformation in the business-to-business commerce ecosystem and the creation of an entire new industry with world leaders such as Micormax. 2016 will see the market deepening and broadening, exciting new technologies and the spread of the vernacular internet.
Jaideep Mehta is MD, IDC India and South Asia. Kiran Kumar, research manager, client devices, IDC India and South Asia also contributed to this article