Year of the smartphone

Call it the year of the smartphone: a convergence of several, not all directly related, factors resulted in surging sales of those ubiquitous devices that now go under the name of smartphones. These include the desire to upgrade (from feature phones), a thriving replacement market, falling prices and easier finance options all of which combined to turn 2014 as the smartphone year in India.

And, ironically, not just for international brands. It was the year when Karbonn, Maxx, Intex, Lava and Celkons asserted their presence in a major way, taking on the deep-pocketed MNCs.

The year’s list of top four vendors features just one international brand, Samsung, and three Indian ones — Micromax, Karbonn and Lava.

According to International Data Corporation (IDC), India was the fastest growing (smartphone) market in Asia/Pacific with a quarter-on-quarter growth of 27 per cent in Q3 (July-September) of this year and, over 80 per cent, on a year-on-year basis. Over 23 million units were shipped during this period.

“India continued to see a buoyant uptake for smartphones, thanks to the proliferation of affordable devices,” says Sunil Lalvani, Managing Director, BlackBerry India.

Affordable entry-level phones and price-sensitive offerings saw most Indian original equipment makers register over 100 per cent growth.

“The doubts about us taking on MNCs have been put to rest,” says Shashin Devsare, Executive Director, Karbonn Mobiles.

Market data corroborate his claims. For example, Intex Technologies, another home-grown vendor, saw handset sales move up from a million to 1.7 million units. Of the additional 0.7 million (or 7 lakh units) sales, nearly 0.6 million were smartphone sales.

According to Sanjay Kumar Kalirona, Mobile Business Head, Intex, smartphone sales should account for 50 per cent by volume (as against 30 per cent now) by 2015. And a majority of such sales, he says, happen in the sub-$200 (or below ₹12,000) category. “The year has been a touch point for the Indian smartphone market with significant growth in high capability ones breaking the $100 barrier (₹6,000),” maintains Sridhar Pai, VP, Asia Pacific, Dataxis.

He adds that 2014 also saw Chinese vendors re-discover the smartphone niche in India as they scrambled to fill the gap left by Nokia’s exit. China’s Gionee, earlier a supplier to Micromax, recorded a sale of four million handsets since its March 2013 launch.

Oppo, followed by Xiaomi (both from China), saw good traction as new entrants. Taiwanese computer-maker Asus entered India in July this year.

Competition is intense. International brands such as Lenovo and LG have declared a war with offerings at competitive prices.

Motorola (now owned by Lenovo) made a surprise comeback. And, Acer too, re-entered the segment.

Taiwan-based HTC is going all out to claim a 10 per cent market share (by 2015). Apple is now aiming for affordability with trade-in payments and instalment plans.

However, despite the Nokia buyout (by Microsoft), the fate of Windows operating system-backed devices -- in an otherwise Android-dominated low-cost segment -- is uncertain. In order to stay relevant, the coming year might see more budget phone launches from MNC brands, feels Hemant Joshi, Partner, Deloitte Haskins & Sells.

And can the e-commerce way be overlooked? Not really. Motorola showed the way, and Xiaomi reaped rich rewards. Almost all vendors, Indian or MNCs, have followed suit with exclusive online launches. Intex’s Kalirona is hopeful that in the coming days the share of online sales will move well over the existing 5 per cent. Others like Karbonn, too, are keen to take to the model.

However, for Indian vendors, sources maintain, after-sales service is still an issue. According to Ajjay Agarwal, CMD, Maxx Mobile, the biggest problem has been the issue of touch-screen damage and non-availability of service centres.

Currently, 70 per cent of smartphone sales in India are between screen sizes of 4.5 and 5 inches, with the remaining 30 per cent coming from phablets (5.5 inch screens and above) or other large screen devices.

“I believe vendors have to start looking at ways to provide better after-sales services, especially, in respect of touch-screen damage,” Agarwal says. Also, with the market evolving, brand perception and standardisation are issues that need to be factored in.

“The high-end device offering from Indian low-cost brands are expected to grow multi-fold and create a big opportunity for using high-end devices,” says Murali Retineni, Executive Director, Celkon Mobiles.

But, ironically, high-end offerings from Indian vendors are yet to make a splash.

And this is where Google’s much-hyped “Android One” programme, launched this year, might come to the rescue, sources indicate.

While SN Rai, Co-founder and Director, Lava International, does feel Android One was “a big disappointment so far,” the market is willing to give it some more time.

“Google’s Android One may have created more hype than sales; but it was a bold attempt at standardising entry-level devices,” Dataxis’ Pai maintains.

But, clearly, the upcoming trends that the industry is bracing up for include wearables and LTE-enabled or 4G compatible devices.

In the launch of affordable 4G services by Reliance Jio, the market sees an impetus for a range of new LTE-enabled devices. “Of course, we are ready with LTE devices. And we believe this will be future,” Lava’s Rai maintains. According to Arpita P Agarwal, Leader, Telecom, PwC India, with increased adaptation, bundling offers for LTE-enabled devices will pick up. Also, with new offerings coming in, prices are expected to drop.

Similarly, while Indian vendors are not so gung-ho about wearables (accessories that incorporate computer and advanced electronic technologies), market sources think otherwise. Increased awareness levels will see more demand. “Of course, the market for wearables will mature and you will see increased interest in it. From increased adoption in the health sector, we can see it proliferate further,” she adds. Whatever the outcome, consumers are likely to be spoilt for choices.

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