Premium handset makers to gain market share as consumers seek more features

Representative Image (Photo by Gian Cescon on Unsplash)

India’s mobile handset market is set for a tectonic shift towards premium, feature-rich phones that support multiple functions and entertainment options as faster 5G networks are set up and local manufacturing makes devices cheaper. The change in handset preferences is expected to tilt market share in favour of manufacturers that cater to the mid- to high-end segment, analysts said.

“The Indian handset market is slowly progressing towards increasing value-add in manufacturing thanks to the government’s PLI (production-linked incentive) scheme for mobiles… Top players are expected to halt feature phone production in India in fiscal 2023,” said Aniket Dani, director, CRISIL Research. “Brands are focused on providing affordable 5G smartphones which could cater to growing industries such as e-commerce, gaming, entertainment, and education.”

These handsets feature the latest processing chipsets, are 5G compatible, and have large battery storage, fast-charging capacity and high-resolution cameras. These capabilities are deemed essential for content consumption and generation along with the ability to play graphic-rich games, among other features.

“India is at the cusp of tech transition and 5G will further drive upgrades by consumers who are already on their second or third smartphone purchase, and hence an upgrade in the mid-tier segment is even more likely,” said Tarun Pathak, research director at Hong Kong-based Counterpoint Technology Market Research. “Furthermore, first-time smartphone users will further drive the smartphone market.”

Such a segment includes touchscreen phones that cost upwards of Rs 25,000.

5G driver

India concluded its first 5G spectrum auction on August 1, receiving bids of over Rs 1.5 lakh crore for airwaves that are enough to provide the whole country with the faster mobile phone communications standard. India will have 1 billion smartphone users by 2026 and is poised to become the second-largest smartphone manufacturer in the next five years, Deloitte said in a report in February.

According to Pathak, Samsung, Apple, Oppo, Vivo and Xiaomi are likely to benefit from the changing trend as they diversify their product portfolio.

“More smartphone brands are debuting affordable premium smartphones to cater to consumer demand for powerful lifestyle statements that offer the best-in-class specs for use-cases such as content creation, content consumption and gaming, among others,” said Prabhu Ram, head-industry intelligence group at CyberMedia Research.

According to CMR, the premium smartphone market continues to grow at a fast clip as makers overcome supply chain challenges and consumers go on a pent-up buying spree as the pandemic recedes. One in every eight smartphones shipped in 2021 in India was a premium device.

India’s smartphone user base has crossed the 600 million mark, according to Counterpoint Research. This segment is dominated by Chinese handset makers that have gained massive market share with their affordable smartphones.

Xiaomi and Samsung each had a 19 percent share of India’s smartphone market, followed by Vivo at 17 percent, Realme at 16 percent, and Oppo at 11 percent, according to data from Counterpoint Research for the second quarter of 2022.

Samsung had 16 percent of India’s overall mobile handset market, followed by Xiaomi at 14 percent, Vivo at 12 percent, Realme at 12 percent, and Oppo at 8 percent.

Revenge buying

Analysts expect smartphone companies to scale up premium segment offerings during the upcoming festive season.

“We will look at bringing more powerful devices and work towards making Xiaomi a premium aspirational brand in India,” a Xiaomi India spokesperson told Moneycontrol. In the past year, Xiaomi doubled its offerings in the premium segment. The company’s sales in the over-Rs 20,000 segment grew four-fold in 2021 from the previous year.

Questions sent to other companies regarding their strategies went unanswered.

Even amid inflationary pressure, the transition towards premium phones persists.

“The premium smartphone segment in India continues to be immune to inflationary pressures and has benefited from consumer inclination for revenge buying in the new normal,” Ram of CMR said.

Samsung, Foxconn Hon Hai, Rising Star, Wistron and Pegatron were among 16 companies approved for the PLI scheme to make mobile phones in India, the government said in October 2020.