The Indian smartphone market is seeing a fundamental shift in the way it operates due to high input costs and changing consumer trends, with smartphone makers finding it hard to make and sell phones in the segment under Rs 10,000, which used to drive the highest volumes even till last year.
The mass segment, under Rs 10,000, has seen a 15% decline in shipments in the first quarter of 2022, according to market trackers, resulting from the prevailing chip shortage, high logistics costs, and softening demand, which is driving the volumes up in the subsequent—Rs 10,000-20,000—price segment.
As a result, the average selling price (ASP) has increased to Rs 16,000 in the first quarter, according to IDC India. Counterpoint Research also found the Rs 10,000-20,000 price band grew by 9% on-year in the quarter, the same time when the sub-Rs 10,000 segment shrank by 15%.
Till May 2022, only 20 smartphones have launched priced under Rs 10,000, where that number was at 27 the same time last year. Market leaders Xiaomi and Samsung have moved up the price ladder, reducing the number of launches in this segment, while brands like LG have exited the market altogether.
“As a consequence of the supply chain constraints, higher logistics costs, and prevailing chip shortage, smartphone brands are finding it tough to cater to the entry-level affordable smartphone segment. Average selling prices (ASPs) are increasing,” Prabhu Ram, head-Industry Intelligence Group (IIG), CyberMedia Research (CMR), told ET.
ET’s emailed queries to the top brands didn’t elicit a response.
The segment, which used to see launches from the popular Redmi Note lineup, and Realme‘s Number series now only has one new addition each from Redmi and Realme, while Samsung, which launched five phones under Rs 10,000 last year till May, also has just one new addition this year, according to ET’s analysis. However, despite launching fewer devices, Xiaomi and Samsung still command the lion’s share with 57% of the shrinking market. Counterpoint Research attributes this to older devices from the brands still in stock, and to iterative additions this year.
“Prices of sub-10k offerings from Xiaomi, Realme and the likes have increased over the months because of the high component prices that have been passed on to the consumers. Most launches, as a result, are now happening in the 10-12k price band,” Prachir Singh, senior analyst, Counterpoint Research, told ET.
The segment is now getting refreshed by China-based Transsion Holdings, which operates under sub-brands—Tecno, Itel and Infinix. Together, they launched more smartphones in this segment than any other brand this year, giving strong competition to both entrenched players like Xiaomi and Realme as well as Indian manufacturers Lava and Micromax.
Out of the three, Tecno increased its market share by 3.8% on-year, while the other two Transsion brands made single-digit increments to their market share in January-March 2022, according to CMR data. Together, Transsion Holdings have a combined share of 21.1% of the sub-10,000 segment. Lava and Micromax held 2.7% of the market.
But it’s not just supply constraints that’s forcing brands to move away from the entry-level segment in India. “With high prices of essential items and lesser disposable income at the bottom of the pyramid, there’s also a softening of demand for budget smartphones,” Counterpoint’s Singh said.
Brands moving up the price ladder are leaving the set of users who treat smartphones as an essential commodity, primarily the buyers for phones under Rs 10,000, according to CMR’s Prabhu Ram. The shift in the market is also being spurred by an upwardly mobile cohort, who are driving up demand for affordable premium smartphones.