REPORT ON THE INDIAN SMARTPHONE INDUSTRY

Souvik Ghosh

Ex-Enterprise Sales Manager: SaaS Sales | Ex PRAGMA | Ex Pristyn Care |

Published Sep 15, 2017

Future is mobile computing-Smartphones and Tablets are just elements of it. The industry is on the verge of a whole new paradigm”

- Thorstein Heins

Introduction

The mobile phone market is constantly in a state flux and has become highly competitive with major international players facing intense competition from local players, thus creating difficulties for manufacturers to retain their market shares. A few years ago, feature phones ruled the market and having internet connectivity on your phones would be termed as luxury in India. But now times have changed and this is the era of Smartphones. Smartphones have become almost a necessity in our daily life. Earlier, people who were prone to using feature phones have now become a part of Smartphone culture. This has paved the way for handset makers to enter the Smartphone industry, who were previously manufacturing feature phones only.

Market Overview

In Q1 2017, smartphone penetration in India reached 48% a growth rate of 16% vs previous year. This is because of the rapidly expanding 4G infrastructure and also because of the low-cost 4G data services provided by Reliance Jio. Also, the push from government to promote digital currency is a reason for this rapid increase in the use of Smartphones in India.

Market Share

Currently the Chinese Vendors have increased their sale in the market. Companies like Xiaomi, Oppo, Vivo, and Lenovo have made significant investment in India that have disrupted the local companies like Micromax. This Chinese Vendors have also caused a dip in the market share of Samsung. The current market share of Samsung in 27% after Q1 2017, whereas it was 30% in Q1 2016. The combined market share of Chinese Vendors is 45% in Q1 2017 as compared to 27% in Q1 2016. Local brands like Micromax, Intex, LYF, and others now capture 12% of Indian Smartphones sales.

PESTEL Analysis

I. Political Factors

This environment is also very important from company’s point of view because marketing decisions are strongly affected by developments in the political environment. It consists if laws, government agencies and individuals in a given society. Any political decision can affect market.

II. Economic Factors

Interest Rates, Inflation, and Taxes affect the telecommunication industry as the expenses made by the company affect the pricing of their products. It gets more expensive causing a fall in demand.

As far as smartphone industries are concerned, the economic system is critical as it can control what the organization is to produce, how it should produce and the category of recipient who should use their products.

The Government’s initiative for “Digital India” and “Make in India” plans will also boost the selling of smartphones.

III. Social Factors

Smartphone industries operates in a diverse number of culture

Smartphone industry puts multiple languages depending on several social factors.

Marketing strategy of the smartphones depends on the social factors.

IV. Technological Factors.

Bringing in new technological changes like Wireless Charging, Infinite display, Dual Camera, Fast Charging, Fingerprint Scanner etc.

V. Environmental Factors.

Smartphone industries needs to be energy efficient, they should use renewable energy and smart packaging.

The new smartphones are coming up with 100% recycling products. And the raw materials used are free of PVC, they contain Bio-Plastic recycled metals, free of nickel.

VI. Legal Factors.

The Smartphone vendors normally have Patent over their innovations. All the vendors have copyright and trademark over their products. So, if any other vendor wants to copy any of the innovation they will have to pay the patent rights.

Total Demand & Supply of Smartphone Industry

According to the studies by ASSOCHAM and KPMG there are around 350 million shipments of mobile handsets in 2017 in Indian market. It is 25% more than the total shipments in 2016. The report also states that of all the shipments made in India in 2016 43% have been for Smartphones.

Though there was a surge in the demand of Smartphones between 2008-2012 there was a dip of about 30% in the next two years. But this was reversed with government initiatives such as “Make in India” and FTTF (Fast Track Task Force).

Market size of Indian handset industry in Calendar year 2016 has been swinging from Rs50 billion to Rs55 billion. It touched the 54 billion marks in June 2016, so according to the reports the size of the smartphone market as of June 2016 was 54 billion rupees. Though there is only a small rise in the supply of smartphones as compared to May 2016 but if we see the previous year’s record we will see a 4% increase in the revenue. It should also be taken into account that the volume of handsets supplied by the vendors also increased by 10 million handsets in a month. So the Average Selling Point(ASP) has been registered lowest in June 2016 with ASP of Rs5400 per hhandset.

Compound Annual Growth Rate(CAGR) of the Smartphone Industry

“Indian Mobile Handset Manufacturing Market Expected to Grow at a CAGR of 49% by the Year 2020.”

India is the second largest Smartphone market in the world. India has over 185 million smartphone users and it will grow only in the future. It is estimated to be about half a billion smartphone users in India by 2020.

Foreign companies look at Indian market as an opportunity to earn more profit as because the cost of production in India is very low as compared to other countries. This is because of proximity to market, and huge market potential which are the drivers to this inclination.

The current penetration of mobile handset is estimated to be 80% of the total population. Analysts predicted that penetration will be as high as 94% by 2020. In addition to that the Smartphone segment is fast overpowering the feature phone segment and is set to grow from 148 million to 690 million by 2020.

Below is a table showing the growth in the mobile phone and smartphone industry.

Profitability of the Industry

The Indian vendors imports almost all of their products from China, and it reported a net profit if 5-6% of their sales revenue in 2012-2013.

India’s largest vendor Micromax gained 190crore net profit, which is 6.1% of its 3,106crore revenue. It’s profit before tax was about 9% of the revenue which is around 280crore.

Lava International which is another Indian vendor earned a profit of 55crore which is 5.6% of its 972crore revenue. It’s profit before tax was 83crore which was 8.5% of its revenue.

The world’s largest smartphone makers, Samsung and Apple also earned 13.22% and 21.42% net profit respectively.

In a report in 2012-2013 it was seen that the mobile handset market in India was dominated by feature phones, but from the next year there has been a huge growth in the smartphone market with the introduction of 3G and currently 4G services. It is evident the smartphone market will keep on growing and it a market that doesn’t fail to earn profit.

Prospects

In the present generations, the smartphones are not just a mode of communication. They are being used for multiple other purposes. The smartphones are getting smarter and better with each new launch and we witness a new technological upgradation. Few years back we could never have thought of the concept of bezel-less display on a smartphone. But with Apple’s newest product i.e. the iPhone X we see the Infinity Edge to Edge Display. In the same way, we have seen multiple new features being added in smartphone such as the Fingerprint lock where we can use our fingers to protect our data’s. Multiple other innovations are expected in the future as well.

Now coming to the prospect from an organization point of view, India is the fastest growing smartphone market in the World. According to a report shared by IDC around

27.5 million devices are sold in the second quarter of 2016. So it is evident from the figures that India is a huge and attractive smartphone market.