Smartphone demand in election season falls short, impact on IT hardware likely too

Smartphone

As India gears up for the Lok Sabha elections, typically a period marked by increased consumer spending and market activity, smartphone sales are bucking the trend. Contrary to expectations, there's been no surge in smartphone demand in the lead-up to the elections, indicating a subdued market sentiment.

Analysts had anticipated a boost in smartphone sales ahead of the elections, as observed in previous election cycles and during festive seasons. However, the absence of significant government schemes offering free devices, a strategy previously employed to garner voter support, has contributed to the lacklustre performance of the smartphone market.

Shilpi Jain, a Senior Analyst at Counterpoint Research, highlighted the absence of initiatives aimed at stimulating consumer spending in the run-up to the elections. The Uttar Pradesh government's procurement of 2.5 million smartphones under the Swami Vivekananda Yuva Sashaktikaran Yojana stands as a rare exception in this regard.

Faisal Kawoosa, founder and analyst at TechArc, emphasised the diminishing allure of smartphones as a political tool. With no major promises of free devices by political parties, the smartphone industry finds itself devoid of the usual pre-election momentum.

Kawoosa noted that smartphone brands launching phones with a higher price segment of 20-25 percent, prioritising profitability. “As they progress to the next brackets, the unit volume sales opportunity reduces. So they won't be able to sell more or like before numbers. At the same time, there isn’t a strong reason to trigger more than normal sales. 5G has become a hygiene factor, without any motivation for consumers, whereas AI, foldables, etc., remain niche."

Counterpoint Research reported a decline in overall smartphone sales in the first months of the year, with a continued sluggish trend expected in the coming months. TechArc's preliminary figures for the January-March quarter suggest a dip in sales at 25-27 million, compared to 29-30 million last year for the same period.

Analysts attribute the weak demand to factors such as the post-festive season effect, increased replacement cycles, and a lack of compelling reasons for consumers to upgrade. The absence of enticing features beyond 5G compatibility further dampens consumer interest.

Looking ahead, IDC anticipates a modest year-on-year growth in smartphone shipments for 2024, driven primarily by regular handset upgrades rather than election-related factors. Navkendar Singh, AVP of Devices Research at IDC Asia Pacific, emphasised the role of offline channels and strategic partnerships in driving demand.

Despite the sluggish smartphone market, there's optimism regarding the second half of the year, with trends such as offline channel growth, premiumisation, and 5G upgrades expected to gain traction.

The tepid market sentiment extends beyond smartphones to encompass IT hardware sales as well. With the impending elections, analysts predict a slowdown in sales of laptops, desktops, and peripherals, particularly in the commercial segment.

Bharath Shenoy, principal analyst of client devices at IDC India, highlighted the impact of the elections on government and enterprise procurement. The diversion of focus towards electoral activities is expected to delay IT hardware purchases until later in the year.

“The elections directly impact the commercial IT hardware category. The public sector's spending has dropped, and enterprises like IT and ITES majors aren't purchasing as much. Their focus is on the elections, and we don't expect any momentum until the end of the first half of the calendar year. We anticipate low activity in Q1 and Q2,” Shenoy said.

Market data from IDC indicates stagnant growth in commercial IT hardware sales in the first half of 2024, with momentum projected to pick up only in the latter part of the year. However, local assembly of IT hardware is anticipated to increase, providing a silver lining amid the prevailing market

challenges.

As India navigates the election season, the tech industry braces for a period of subdued activity, with hopes pinned on a revival in the post-election period to reignite consumer and enterprise spending.