India set to Experience Surge in Low-Cost Smartphone Market

July 30, 2014 Posted by India Briefing Reading Time: 3 minutes

DELHI – As handset manufacturers seek to cash in on one of the few emerging markets still transitioning from phones to smartphones, India is experiencing a surge in low-cost smartphone manufacturing.

According to Jayanth Kolla of telecoms analyst Convergence Catalyst, even in other developing countries such as China the smartphone market is quickly becoming saturated, “But hundreds of millions in India are about to upgrade to their first [smartphone], so manufacturers are piling in.”

It is easy to see why; India has the second and third highest number of mobile phone and internet users, respectively, in the world.

The country’s 893 million mobile phone owners make up only about 3 percent of its population and Mckinsey predicts that India’s base of internet users will overtake that of the U.S. by 2015.

Internet penetration is increasing exponentially as is India’s demographic of young, urbanized, economically conscious and tech-savvy consumers who favor mobile devices over computers for surfing.

According to IT and telecommunications analyst IDC, India is the fastest-growing market in Asia-Pacific, with a year-on-year smartphone shipment growth of over 186 percent in 1Q 2014.

Unlike the West, however, expensive brands like Apple’s iPhone have failed to take off, with Indian consumers’ need for low-cost handsets apparently winning out over their love for foreign brands.

Android-based phones, on the other hand, with their wide range of prices and apps, continue to be popular. Meanwhile, Google has released handsets designed to work on lower-cost hardware and even recently launched “Android One,” a set of guidelines for device makers seeking to make low-cost smartphones.

Korean electronics giant Samsung continues to hold the lion’s share of the Indian smartphone market with 38 percent (19 percent of the overall mobile phone market), 50 percent of which, according to IDC, is made up of low-end Galaxy smartphones.

However, Samsung is closely followed by, and is facing increasingly stiff competition from, homegrown companies Micromax and Karbonn, who hold 13 and 10 percent of the smartphone market and 16 and 10 percent of the overall market, respectively.

Foreign companies are also rushing into India to launch or expand their operations. In May, Dutch multinational Phillips tried its hand at a comeback, releasing three new android smartphones there.

Feature phones still hold over 70 percent of the Indian mobile market, but IDC says this is rapidly changing.

In the first quarter of 2013 feature phones held 90 percent of the market and as companies continue to pile in to produce affordable smartphones, the balance will inevitably shift.

It’s an exciting opportunity globally, thinks John Sculley, former Apple CEO who recently launched low-cost smartphone brand Obi in India. “India is growing incredibly rapidly with smartphones…it is going to be huge.”

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email india@dezshira.com or visit www.dezshira.com.

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