Even though both Indian and global vendor shipments declined year-over-year during Q2 2016, smartphone shipments from China based brands including Lenovo, Vivo, Xiaomi, OPPO and Gionee grew 28% q-o-q; shipments from these brands also grew 75% in CY Q2 2016, a report from market research firm IDC said. The entire Indian smartphone market shipped 27.5 million units in this quarter, registering a 17.1% growth when compared to previous quarter and a marginal 3.7% y-o-y growth.
Until this quarter (Q2 2016), Indian smartphone brands heavily depended on pricing their devices under the sub-$150 market segment, but these vendors are now facing increasing competition in the same sub-segment from Chinese brands, says IDC.
“Shipments of key Indian vendors Micromax, Intex and Lava put together dropped 20.4% sequentially as they struggled to push their inventories into the market,” said IDC in the report.
However, one particular India vendor—Reliance Jio’s LYF models—stuck to aggressive device launches especially under the sub-$50 segment. Over half a million 4G enabled LYF smartphone models were shipped this quarter, registering a 12.3% sequential growth, placing the vendor at 5th position among top 5 brands in India in terms of shipments. In the previous quarter, LYF smartphones accounted for 7.1% of India’s smartphone market in terms of shipments.
How Chinese brands are taking over the Indian market
IDC points out that apart from the sub-$150 segment, Chinese brands made a significant entry in to the premium segment (above $300) as well, capturing about one-third of this segment in Q2 2016. For comparison: Apple’s iPhone SE “failed to make any significant impact in the premium segment,” IDC added, while its older generation models including the cheaper iPhone 5S contributed to a majority of Apple’s shipments, added the report.
Apart from entry into premium segment, Chinese brands like Xiaomi have started selling phones via offline stores, and even is betting on opening single brand retail stores in India. In addition, some brands like Huawei and OPPO are also looking to manufacture and sell phones locally within India.
Offline shipments: The aggressive expansion on offline seems to have affected the online share of smartphone shipments which dropped to around 28% in Q2 2016, according the research firm. “Healthy growth in the offline channel, online focused vendors expanding their footprint into retail channel followed by stringent norms to restrain excessive discounting on online platform are some of the reasons that could be attributed for online share decline this quarter,” IDC added.
Basic phones shipments accounts half of overall phone market
Even though the Indian smartphone Industry witnessed a healthy growth this quarter, feature phones or basic phone shipments accounted for more than half of the overall Indian mobile phone market (including smartphones). India shipped 33.7 million units of basic phones in Q2 2016, registering a marginal 2.6% y-o-y growth, IDC pointed out.
In addition, the rate of users switching from feature phone to smartphones slowed down due to “cautious spending behavior of consumers, clubbed with feature phone’s continued relevance to the target customer’s usage needs”, according to IDC. Interestingly, first time phone users and entry-level phone users mostly prefer basic phones over smartphones, as the price difference between entry-level basic phones and smartphones is just Rs 1000. Smartphone vendors are finding it difficult to match such low prices to capture first time/entry-level buyers.
Another key reason for increase in feature phone shipments is the decreasing number of CDMA service providers, IDC added. Many entry-level users are instead upgrading to GSM-based feature phones to continue using telecom services, rather upgrading to smartphones.