Business News/ Economy / Smartphone market stays below pandemic levels, concerns remain
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India’s $40-billion-plus smartphone economy is likely to continue below the demand in the pandemic era, raising concerns around how the market can revive itself. While a mid-single-digit growth in volume of smartphone shipments has been projected for the year, the overall demand from consumers in the long run remains a concern as India eyes a $500-billion electronics economy by 2030.
India’s $40-billion-plus smartphone economy is likely to continue below the demand in the pandemic era, raising concerns around how the market can revive itself. While a mid-single-digit growth in volume of smartphone shipments has been projected for the year, the overall demand from consumers in the long run remains a concern as India eyes a $500-billion electronics economy by 2030.
With government-affiliated think-tank Niti Aayog valuing India’s electronics industry at $155 billion as of the past fiscal, the smartphone economy is important as it accounts for over a quarter of the electronics market, without taking exports into account.
With government-affiliated think-tank Niti Aayog valuing India’s electronics industry at $155 billion as of the past fiscal, the smartphone economy is important as it accounts for over a quarter of the electronics market, without taking exports into account.
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As a result, a prolonged slump in this critical market could lead to multiple issues, which include a slump in the growth of India’s electronics manufacturing services (EMS) firms, slowdown in global investor interest in the electronics sector, and multi-billion-dollar losses in the domestic consumer electronics market.
Case in point—in 2021, as the pandemic started receding, 161 million smartphones were shipped to retailers across India at an average selling price of around $227, as per data from market researchers International Data Corporation (IDC) India and Counterpoint Research. Cumulatively, India’s smartphone market generated $36.5 billion in annual revenue.
Since then, in the past three years, a prolonged slump in consumer demand for smartphones has led to annual retailer shipments declining. A total of 153 million smartphones are projected to be shipped by the end of this year, which is still 5% short of 2021’s high—even after three years.
Premium smartphones demand
The market value, however, has indeed grown, thanks to demand for more premium smartphones—and specifically Apple’s iPhone. The average selling price of smartphones has risen from $227 ( ₹17,500) in 2021 to $258 ( ₹22,000) as of this year—a near-26% rise in rupee terms. In turn, this has led to $3 billion in incrementally higher revenue generation from the smartphone market—this year, the revenue is expected to be $39.5 billion.
This marks a meagre compounded annual growth rate of 2.7% in the smartphone market’s value generation, while volumes are already down 5%. This is grossly underwhelming—Niti Aayog’s projection earmarked that for India’s electronics industry to reach $500 billion by 2030, a 26% annualized growth rate would be needed. Smartphones, clearly, are lagging far behind.
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Now, industry stakeholders are feeling the heat.
Mumbai-based Manish Khatri, partner at multi-brand electronics retailer Mahesh Telecom, underlined that 2024 was a year of sustained stagnation, after early flickers of a turnaround.
“Smartphone sales in India experienced a sluggish 2024. Despite some growth in the first half, the festive season sales were underwhelming. While high-end phones faced a decline in popularity during the peak sale season, budget-centric brands such as Poco, Lava, Itel, and Motorola observed a surge of interest in budget 5G smartphone offerings from returning buyers. There is some demand coming back for the budget devices, but the market has remained stagnant in the overall sense," Khatri said.
Navkendar Singh, associate vice-president, client devices at IDC India, added that a key factor for this market dynamic is a lack of first-time buyers, which can lead to concerns in the near term. “There is no organic demand, and next year too, we expect to see a similar mid-single-digit year of growth in terms of volume. The average price of a phone is gradually stagnating and is unlikely to keep expanding indefinitely. This poses key concerns regarding the potential growth targets of the electronics economy that have been set for 2030," he said.
Slow value growth
Singh further said that while the market may finally climb back to 2021’s sales volumes by the end of next year and thus take four years to recover, the value growth is unlikely to be staggering. “Where will the additional demand come from? People buying budget 5G phones, as well as those buying mid-premium category devices, are all a part of the natural upgrade cycle of existing users—which means that the industry isn’t growing," he added.
However, others have a different view.
Tarun Pathak, director and partner at Counterpoint, said that by next year, the market may grow to $50 billion in value. "The demand for premium phones is unlikely to go away, even if the heavy demand slows a little in the near term. There are technologies such as foldable displays and the whole gamut of AI that are yet to fire. Even without first-time users, there is plenty of room for near-term growth here," he said.
Still, a senior executive at one of India’s top five smartphone brands said, requesting anonymity, that 2024 was “a challenging year indeed."
“The bets around AI have not really worked out, and there are concerns at R&D divisions around what could really generate the kind of sticky demand that would convert non-users or feature phone users at the last mile. Until we get this going, the overall market demand is likely to remain weak—which isn’t good news for the overall economy," he said.
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