Indian Smartphone Market: Every Brand’s Go-To!
In today’s day and age, it’s best for any brand to hike up their stake in the mobile phone business in India. The country’s smartphone market growth vis a vis global is 3x by value percentage. Let’s have a look at conclusions and ramifications.
There are various agencies which share quarterly data on shipments of mobile phones – both global and country specific. IDC, Counterpoint, Canalys, Statista, TechArc (India specific) to name a few. For ease of understanding, the data is always shared in absolute volume terms or market shares. This has been going on for years and seems to have become the norm. How many of us talk about the total value of the smartphone market? Value, according to me, is more relevant at brand and channel level as it’s the primary data for balance sheets every financial year end. For manufacturing units, of course, volumes would be more relevant.
So let’s turn it around and see what happens when we see the market in value terms.
Data from IDC mentions that the global market in 2018 declined by 4% in 2018 to 1.42 billion (volume-wise). I believe the data from the others will not vary much. Taking the ASP at USD 347, as per one of the reports from IDC released for 2018, the total value market has actually increased by over 6% vis a vis a decline of 4% in volume. Isn’t that interesting? Have a look at the Table 1.
Bringing it down to country level, let’s have a look at a recently published data by IDC/Counterpoint/TechArc which makes it even more interesting. The data clearly shows an upward trend in 2018 only in value globally, and both in volume and value in India. In 2018, China shipments are expected to be roughly three times the volume of India. By 2022, that ratio will shrink to 2:1.
2019: Key Highlights – Global
1. As per IDC, emerging markets specially India – 5G and new product form factors will help revive the smartphone market with an approximately 3% growth.
2. The growth expectations based on emerging markets, may take a hit if the U.S China trade war escalates, probably bringing down the outlook down to a flat or a declining scenario.
2019: Key Highlights – India (Data as per TechArc)
1. There will be de-growth in volumes in the price segments below Rs.5k and between Rs 5-10k with their contribution coming down to 20% approx.
2. Maximum 11.6% increase will come from the mid-price segment i.e. between Rs.10k and Rs.25k. This segment would contribute to 51% of the overall sales volumes.
3. So in terms of user behaviour the customers are moving up the price ladder with 80% of the smartphones above the USD 140 mark. This is bound to happen with the smartphone users going in for better quality and higher specification smartphones as they upgrade.
CONCLUSIONS AND RAMIFICATIONS
1. India as a market offers huge potential both in terms of volumes and value as both are increasing. The overall India market should grow by 6.7% in 2019 as compared to 2018 and 13.4% in value. This would mean a gain of close to Rs.22.6k Crore or USD 3.2 Million over 2018.
2. India is one of the few markets that has not hit maturity and still has way to go even in 4G adoption, which will help fuel growth, according to IDC.
3. With the global market declining in 2018 and expected to be stagnant or declining slightly again in 2019 in volumes, India is the best bet for any brand. Expect the competition to get more intense with more brands trying to enter and existing top 6 brands trying to take-up more share.
4. With the ASPs moving up, there is scope for good brands with good quality and design and hardware and/or software differentiators entering the market. I think the price/specification ratio may not be as relevant for a discerning customer at the new higher ASPs, if one pitches it right.
5. There is no global or Chinese brand as of now present in the sub Rs.5k category which as per TechArc will contribute to 5%. This % on the projected 160 million market by volume for 2019 is 8 million devices. Taking the ASP at Rs.3000, the market size in value will be Rs. 24000 million or Rs. 2400 Cr. annually. With the four MILK brands and lots of smaller Indian and small Chinese players, this is surely not a segment which can allow a brand to survive in terms of value contribution. So it may not work for Indian brands hoping to make a strong come back via this route only.
6. Add to it what Jio could do in terms of disruption which will hit this segment first, the comeback for Indian brands would become tougher via this price segment. They can do their bit here and also get some market share in the Rs 5-10k segment which is easier said than done. So back to pushing boxes – Go full steam on 2G feature phones for as long as one can and hope Jio continues to do business the way it’s doing now.
7. I do hear from a lot of people in sales and channel that #Xiaomi and #Realme do have plans to launch devices starting Rs. 3990 with a 1GB/8GB combination. Well they can do it but with the contribution being so low, it technically does not make sense either in volume or value terms for the bigger players to enter this segment. Presence in this segment could also hurt their plans to move up the price ladder in terms of brand perception. Oh, is this the reason Xiaomi and #Redmi are being separated as brands with Redmi playing in this segment? Maybe! In this industry be ready to be surprised. On the other side, the volumes and % contribution of the category could shoot up if the product is a game changer.
8. Table 2 (See below) shows the revenues for the financial year ending March 2018 for select leading brands as per ROC. Interesting to note is the fact that the total growth in value terms expected in 2019 is just 10% less than the revenues of Xiaomi the no. 1 brand in the financial year 2018 by volume. Whether brands are able to hold on to their turnovers of 2018 in 2019 and what share do the new brands entering can take from the additional opportunity available is the only question.
9. What is also interesting to note is that 3 out of the 5 companies whose data is shared are profitable companies. #Oppo and #Vivo are in losses due to over-the-board marketing expenses, discounts and supports offered earlier which have since been reduced by them but some of these are committed over a period of time and hence unavoidable in calculations.
10. Last but not the least #Apple with much lower volume had higher revenues than an Oppo or Vivo.
QED