5G pushes buyers towards pricier smartphones in first week of festive sales

5G smartphones have been leading the sale of mobile phones in India this festive season. According to industry experts and analysts, nearly two out of every five devices sold on festive sales, both online and offline, in the first week were 5G equipped, marking the highest market share for 5G phones in India in any given period.

“The share of 5G phones among all smartphones sold in the first week should be anywhere between 30-40% of all phones sold. This share, however, could have been larger — but a large pending inventory of over 10 weeks has seen retailers extend offers to 4G phones in the budget segment,” said Tarun Pathak, research director at market research firm, Counterpoint India.

Pathak, however, added that a larger influx of 5G phones in the overall market share will lead to a spike in the average selling price (ASP) of smartphones in the Indian market. “Given that 5G devices have largely come in at higher prices, we should see the ASP rise by around 10-12% in the first week of this year’s festive sales,” he said.

According to Pathak, the first week of 2021’s festive sales saw the ASP of smartphones in India pegged at around ₹15,500 — a figure that can potentially rise to ₹20,000 owing to a larger proliferation of 5G devices in the country.

The first week of festive sales typically sees a higher ASP every year, buoyed by consumers looking to cash in on deals and discounts on premium devices — such as Apple’s iPhones and Samsung’s flagship Galaxy S series.

However, while larger sales volumes in the budget segment typically outweigh premium phones eventually, analysts state that 5G devices could see the ASP rise this year.

This rising ASP comes as a boon, since the smartphone market is not seeing growth in the number of devices shipped. As a result, despite the flat sales trajectory, smartphone retailers should see higher revenue than last year.

Sanjay Kothari, associate partner at market research firm Redseer, said that the gross merchandising value (GMV) of the first week of festive smartphone sales could see a 20% year-on-year growth, driven by higher priced 5G smartphone sales.

“While you have the likes of Apple and OnePlus pushing premium smartphone sales with heavy discounts, the budget 5G smartphone sector has also seen good demand,” he said.

Manish Khatri, partner at Mumbai-based retailer Mahesh Telecom, said that in the budget sector, Samsung has seen strong demand owing to deals that have brought basic 5G phones down to less than ₹15,000.

“On the other hand, you have massive discounts on phones such as the Samsung Galaxy S22 Ultra and S20 FE, which has seen Samsung witness strong demand during this period,” Khatri added.

To be sure, the festive season — which industry stakeholders count as a five-week period from the last week of September to end-October every year — is the most valuable period for India’s smartphone industry. These five weeks account for nearly one-fifth of the entire year’s smartphone sales, thus making it a crucial period for brands.

2022’s festive season has been deemed to be even more significant, since smartphone shipments in the country have declined for three sequential quarters this year — an unprecedented trend.

While the demand for 5G phones is a positive sign, experts say that it is too early to count this period as a sign of the market recovering.

“It is difficult to expect the market to ship over 50 million units every festive quarter. Upon preliminary estimates, we expect shipments during this period to remain flat — or witness very marginal growth at best — over 2021’s festive period,” said Navkendar Singh, associate vice-president at market research firm International Data Corporation (IDC) India.

Singh added that the rise in 5G phone sales is a natural way forward, given that telcos are expected to roll out the first phase of consumer 5G services next month. This, in turn, could see phone makers gain some respite thanks to higher revenues — even as the consumer demand remains tepid at best.