Mumbai, March 7 The growth in the Indian smartphone market in 2022 is expected to be driven by a shift to higher price bands and premiumisation with 5G playing a key role, according to GfK.

In 2021, the contribution of 5G handsets stood at 12 per cent by volume. 5G handsets volume contribution is expected to cross 40 per cent in 2022.

“While supply led issues are expected to continue for some time, we forecast revenue led growth in 2022 to be driven by shift to higher price bands and premiumization. 5G enabled handsets will play a key role as India gets ready to rollout 5G services in near future,” it said.

After a significant drop in revenue in 2020, 2021 started off on a positive note for the Indian smartphone industry with the market recording  growth in revenue of 37.5 per cent for offline and online combined, compared to the first and second quarters of the previous year. However, this development leveled out over the course of the year, resulting in only a slight revenue increase of 8.8 per cent in the second half of the year.

“Even though the Indian smartphone market ended 2021 with an overall growth in revenue, it needs to be emphasized that growth in second half of the year was significantly lower than the first half and the mode of consumer purchase also varied,” explained Kartik Vasudevan, Strategic Accounts Director – India, GfK. 

Vasudevan further added that offline channel declined by 2.3 per cent in the second half of the year, while online grew by 28.7 per cent. 

“Shifting consumer buying preferences, persistent price pressure and supply led issues for semiconductor chip are some of the key reasons for this lopsided growth,” Vasudevan said.

“With 5G services expected to start sometime in near future, consumers will future proof their purchases with 5G enabled handsets,” as per GfK.

Average selling price to go up

This is also expected to drive up the average selling price. 

While the average selling price for smartphones stood at ₹14,806 in 2021, prices for 5G handsets were 117 per cent more. 

According to GfK Consumer life survey, 62 per cent of surveyed urban Indian consumers, especially the millennials and Gen Z, are looking for technology which “knows them”, “gives recommendations and takes actions on their needs.”

“It is this trend which is driving consumers to buy new smartphones which are not just faster or powerful but also easier to use and is part of their daily hustle,” it said.

At a total market level, the average selling price of handsets has increased to 12.3 per cent in 2021 vs 2020 for both offline and online channels combined.

“Buying new tech products is one of the most important ways of pampering self for millennials and Gen Z and this will be one of the key factors to drive premiumization,” it further added.

The contribution of handsets priced over ₹30,000 in 2021 stood at 19 per cent by value against 15 per cent in 2020. 

While the contribution of  handsets priced over ₹30,000 grew at a total level in both channels, within the offline market, premiumization is no longer a big city phenomena, as per GfK.

Tier 2 and below cities

In 2021, the contribution of Tier 2 and below cities stood at 60 per cent by volume. This indicated that more premium handsets were sold in Tier 2 and below in the offline market.

“The rapid expansion of 5G handsets is expected to drive the premiumization of the market. Although 5G is an important factor influencing the market, its potential has not yet been fully exploited. 5G will be very important to drive some of the latest technologies of voice and camera applications which would be AI driven,” it further added.

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