5G connectivity may not make it to India’s budget smartphone buyers anytime soon

The rollout of 5G smartphones in the budget segment (under Rs12,000) will be limited to a few models subsidized by companies to showcase presence across segments. Industry analysts say that 4G smartphones will continue to dominate the segment even after 5G services are available.

“5G is more of a marketing thing right now and showcasing presence across channels,” said Navkendar Singh, Associate Vice President, Devices Research, IDC India, South Asia and ANZ. He said that 4G models will still do well below the Rs. 12000 price point, and it is challenging for firms to bring a 5G device at this price.

According to IDC, the average selling price (ASP) of smartphones has been growing every quarter since Q4 2020. In the quarter ended June 2022, it was $213 (approx. Rs 16,957). An increase in ASP shows that smartphones are getting expensive. This is because companies are focusing more on the high-value mid and premium market.

Singh said that demand from the lower segments is tapering due to “inflationary pressures” and the fact that brands are struggling to price models in these segments as they used to two years back. 

Many of the top brands haven’t launched smartphones in the budget segment in the past year, and don’t plan to till at least next year either. Faisal Kawoosa, founder and chief analyst at research firm TechARC, said that it is not possible to offer 5G smartphones in the budget segment at the same price as 4G smartphones. “You will need bare minimum hardware to run games that can take advantage of 5G and its benefits. When we moved from 3G to 4G, the hardware also improved. With 5G, hardware will be upgraded further and it will be difficult for brands to offset that cost,” he added.

Tarun Pathak, research director at Counterpoint Research concurred. “5G will not penetrate into lower price points at the same pace it penetrated other segments. The bill of materials will not allow that,” he said. The bill of materials (BOM) cost of a phone is the combined cost of all of the components, like chipset, display etc., used to make it.

Kawoosa added that every generational upgrade kills a threshold in the market. “Prior to 4G we had a segment of ₹4000-6000. After 4G came, no brand was able to sustain in that segment. Similarly, 5G smartphones will create a new threshold of ₹8000 to ₹9000, leading the budget segment to shrink further,” he said.

Smartphone brands are also aware of these challenges and won't be able to launch affordable 5G smartphones anytime soon. "While we have already introduced 5G smartphones in the sub- ₹15,000 segment, we are now working towards bringing the prices further down. There are challenges however given high component costs and fluctuating dollar prices. We don’t want to bring a smartphone that does not meet all the needs of our users and hence will take some time to bring a 5G smartphone in the sub-₹ 10,000 segment," said Madhav Sheth, CEO, Realme India.

That said, brands will consider strategic partnerships with telcos to offset the cost. “Brands can bring ecosystem players who can subsidize and share the cost. Jio can use it for monetization by acquiring users for platforms such as Jio Mart,” said Kawoosa. 

At Jio’s annual general meeting earlier this week, the company said it is working with Google to create a low-cost 5G device. The lack of interest from other brands may be beneficial for Jio in the long run, if it succeeds to make such a device.

5G smartphones accounted for 33% of the overall market in the quarter ended June, according to data from Cybermedia Research. Counterpoint’s Pathak, too, acknowledged that most brands are going in favour of value. “But big players such as Samsung and Realme will always keep an eye on this segment as there still are around 250 million feature phone users in India, who will look to upgrade to a smartphone soon,” he noted.