India is one of the most attractive mobile markets in the world. Recently Strategy Analytics claimed that India is now the 3rd largest smartphone market after China and US (Based on Q1’13 data).
In 2013, smartphones are expected to be 16% of the total shipments. This means 37 mn smartphones would be shipped this year in India as compared to 19.6 million last year representing a growth of 87%. The growth is expected to remain high for next 3 years with smartphones reaching 85% of total mobile phone shipments by 2016.
India to follow China with 3 years lag
China experienced explosive smartphone growth in the last few years with almost 85% of mobile shipments expected to be smartphones this year (up from 58% last year). In 2010, China was roughly at the same level (15%) as India would be in 2013 which corresponds to a 3 year lag between the two countries
As projected in the chart above, if India were to follow China’s growth trajectory, then India would be reaching 85% shipments as smartphones by 2016. Based on the above projections for smartphones and keeping in mind the replacement cycle of 24 months, 300 million mobile phones are likely to be sold in 2016 out of which 256 million devices would be smartphones. The table below gives the feature phone and smartphone projections till 2016
Factors supporting the forecast
This is not a simple extrapolation and there are clear reasons for projecting this high growth for India. Skeptics would argue that China has a higher per-capita income and is now an operator subsidized market which has resulted in high growth for smartphones. True, China is ahead in terms of income and subsidy but there are other realities of market that would enable India emulate China’s growth in smartphones:
1. Falling Smartphone prices: Smartphone prices would fall faster in future than they did in the past making the smartphones much more affordable. The cheapest smartphone today is around $60-65 and by 2016, the cheapest smartphone is likely to be in $35-40 range. Presence of many Indian and Chinese vendors is resulting in more affordable smartphones. China reached 85% level in 2013 when the smartphone prices are still high.
2. Increasing Data Usage: Today, there are 100 million mobile internet users in India. This is likely to increase to 367 million by 2016 (source: GSM Association) which is roughly the same level as China today. Smartphones are vital for good internet experience and as more and more consumers get hooked on to mobile internet, smartphone demand would increase.
3. Consumer Aspirations: For the first time last year, the average selling price of mobile phones increased and that too by over 20%. This is a trend reversal and is due to consumers upgrading to smartphones faster than ever before reflecting the consumer aspirations. As smartphones reach critical mass and become more and more visible in the hands of consumers, the other feature phone owners would be enticed to upgrade to smartphones
4. Replacement Driven Market: India is now over 80% replacement sales market. This means if 100 phones are sold in the market then more than 80 phones are picked up by consumers who are existing users. This is likely to be a significant contributor to smartphone growth as consumers replacing their handsets are more likely to upgrade (Replacement consumers are more comfortable with category and many would have already experienced GPRS on their feature phones and may want to get better experience)
The consumers are ready to embrace smartphones in India but are the telecom players (device vendors, operators, content players, etc.) factoring in this explosive growth in smartphones? Do let me know your views.
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Mohit is a telecom professional with rich experience over 15 years. His expertise is in the area of strategy and planning and his work experience includes stints with two of Big 5 consulting organizations, a telecom operator and a handset vendor. Mohit can be reached at firstname.lastname@example.org