Budget smartphones lose favor from both brands and buyers

The share of entry level smartphones in India’s smartphone market fell to below 50% in 2022. These devices, which are priced below ₹8000, usually account for the largest part of India’s market. However, analysts and market watchers have been noting a steady decline over the past year or so. According to market research firm the International Data Corporation (IDC), the share of these devices fell to 46% in 2022 as compared to 54% a year ago. 

This comes at a time when the global smartphone market, including India’s, has been shrinking. However, the drop in the entry-level segment also signals the fact that phone makers are struggling to penetrate deeper reaches of the country and convert feature phone users into smartphone users.

“The gap between the cheapest smartphone and a feature phone is too high. It is not coming down. In fact it is increasing. Whatever little demand is coming from feature phone upgraders is being fed by an unorganized huge second hand market,” said Navkendar Singh, Associate Vice President, Devices Research, IDC.

The report also shows that the total number of smartphone shipments to India fell by 10% in 2022, to 144 million, while shipments during the December quarter fell by 27% year-on-year (YoY) to 30 million units.

According to IDC, feature phones accounted for close to a quarter of the total 201 million mobile phones shipped in 2022. The firm noted that shipment of feature phones also declined by 18% to 57 million units in 2022, though. However, experts said that this is likely because those buyers aren’t buying new smartphones, but instead holding on to their feature phones.

Singh noted that the latent demand in the entry-level segment is low, which makes it unprofitable for most brands. “Mass segment is not buying because overall prices have gone up by 20-25% in the last couple of years due to complement costs, dollar weakening etc,” he added. 

“The dearth of new launches in this critical mass segment was a barrier for new smartphone users, thus limiting the overall market’s growth,” said Upasana Joshi, Research Manager, Client Devices at IDC India.

Meanwhile, Transsion, Relame and Xiaomi were the top brands in the entry-level segment, according to IDC. 

Some experts believe that the entry-level segment has also been impacted by growing government crackdown on Chinese brands. Sanyam Chaurasia, senior research analyst at research firm Canalys, said that Chinese brands do have the ability to disrupt the entry-level segment, but have been reluctant because of government scrutiny on them. Since the entry segment is a high volume segment, it can bloat these brands’ inventories.

Further, the IDC report shows that the average selling price (ASP) of smartphones in India increased by 18% to $224 (approx ₹18,000) in 2022. The premium segment, which consists of phones priced above $500 (approx ₹41,000), accounted for 7.2% in 2022 — up from 4.2% in 2021.

The data also suggests a move towards premiumization in India, with shipment numbers declining by 15% for phones priced in the ₹25000 range as well. According to IDC, 50 million 5G smartphones were shipped in 2022 with an ASP of $395, down from $431 in 2021. Analysts expect 5G smartphones to account for 60% of India’s total smartphone space in 2023.