• Ajay Sharma

Can Santa Claus Be The Guardian Angel?

2018 has been a pretty eventful year for the smartphone industry. Let me recapitulate some of the interesting ones, and hope 2019 brings in potluck of fortune.


Market Size

The smartphone market should touch approx. 145 million devices this year. This implies – a less than 10% growth. While Q3 was a great quarter, Q4 is looking below average. One could say that for a growing market like India, the growth is not that great. But, in the light of the entry of #Jio “Fusion Phones” which cannibalised the entry level smartphones and the replacement cycle going up, I would say it wasn’t all that bad. After all in 2018, India is the only major market to grow with global shipments showing a decline.


New Entrants Still Lining Up

There were some new brand launches which got a lot of attention initially by the offline channel. However, the delay in supplies and non-refund of advances paid by some partners for one of the brands and the lukewarm response to the other, left the channel disappointed. Exit of #HTC and #Comio offline brands, only made matters worse. The way things are moving one could see more exits.

#Meizu has made an entry for the third time. They do have an advantage of some Jio distributors aligning themselves as mentioned in my last blog. Meizu has to make it work now or they may not have the privilege of another attempt.

From what I’ve been seeing, more brands will launch or relaunch depending on the way you look at it. And why not? With the sales in China falling down quarter-on-quarter, and ODMs sitting on large inventory and spare capacity, India is their best bet.


Products Reaching Hardware Saturation

2018 was also a year of hardware showdown.

Great looking devices with gradient colourful backs.

Better processors

Higher memory

Better cameras with AI enablement and an enhanced experience on Low Light Photography

Bigger & better screens – FHD+, bezel-less (90% plus Screen to Body ratio), Full View Displays (18:9) to Notch (19:9) and now to Dew Drop notch 19.5:9

Split Screens/Dual displays

More powerful batteries with fast charging

Dual VoLTE


Many of these originating out of the requirements of 4G data consumption in terms of video streaming, downloading video/audio content, graphically demanding high performance games like #PUBGMobile and #Fortnite on one side and uploading high quality content requiring the best of cameras on the other. And to keep you hooked on to your smartphone - bigger batteries doubled with fast charge technology are the trump card.

To be honest, barring a few tweaks (which may be required in hardware with new technology coming in), the current hardware configurations are more than what are required by more than 80% of the users.


Prices (ASPs) Moving Up

Breaking the market into price segments of Rs 5k each starting from Rs. 5k, the growth equation is as under:

Rs. 5-10k segment < Rs 10-15k segment < Rs 10-15k segment. Rs. 10-15k category, as per reports, was till now showing the highest growth. This was bound to happen as India moves to the next level of being an upgrade market. It also shows that people are willing to spend more if their expectations are met. The sweet spot has moved from Rs. 8-10k to Rs. 15k

As per the latest report by IDC – approximately half of the mid-price segment (Rs. 10,000 - Rs. 20,000) customers moved to the Rs. 30,000+ segment with #OnePlus being the leader in this segment.

What I saw as a miss was the Indian brands not being able to do much in the market for smartphones in the Rs. 2.5-5k price segment where the global and Chinese brands do not play. Yes, the market did not grow or maybe contracted but is still a reasonably big market for Indian brands to get decent survival numbers alongwith the 2G feature Phones. They did have the advantage of reach and awareness in the smaller towns with their Feature Phone users. Of course, they may be worried of Jio causing some disruption here – which could hit them both in FPs as well as low end smartphones. But if one were to tread carefully, despite getting stuck, the exit cost in this segment would be low. Better to fight and move ahead than to take a step back.

December will go down in history as the month of price drops across brands, across price points. I am sure the objective was to catch up on the numbers and clear out the stocks carried forward by the offline brands who could not sell during the festival period due to the online blitzkrieg.


Channel Churn:

The rise of online. The ratio between offline and online for 2018 is expected at 62:38 vis a vis 68:32 in 2017 – a growth of just below 20% over last year. This is primarily due to ease of business for the companies, especially new entrants, lower costs of sales meaning a lower MOP and last but not the least… the #Xiaomi success story. Of course, the offline trade also thrives on the fact that most online players are hungry for GMV (Gross Merchandise Value) to support the heavily discounted perpetual sale days they keep on having.

The resurgence of organised retail, both at national and regional level. Organised retail had all but died out a couple of years back in terms of players and contribution. But with companies now eyeing immediate access to multiple outlets at less margins, they are coming back as a preferred choice for all brands. More so for online brands coming offline as they are their own distributors and retailers as well in many cases. #Realme and now Meizu would be taken as examples of brands which are leveraging some of these channels.

For the Bricks and Mortar stores the going has indeed been tough with online on one side and the OT also eating into its share. They will have to find innovative ways which I have discussed in one of my previous blogs. <https://www.sharmaajay.com/home/rewriting-rewiring-reviving-offline>


Existing Brands – The Ups And The Downs

The year has been relatively steady with the top 4 positions very clearly defined with minor changes in shares.

Out of the leading global/Chinese brands, a total of 6 brands –