India Smartphones Q2 2017: LTE smartphone installed base grows 3x

Next 150 Million users are estimated to take half the time as VoLTE feature phones will be bringing LTE to lower price points. For Q2 2017, smartphone shipments grew a modest 4% YoY thanks to GST and featurephone demand remains solid.

LTE installed base of handsets crossed 150 million units only behind China and USA now and is estimated to surpass the USA in next one year.

In terms of performance during the quarter, Smartphone shipments in India grew by modest 4% YoY in Q2 2017. Like China, the top five brands contributed to almost 70% of the total smartphone market. Although local brands grew during the quarter but are still unable to find their place among the top five smartphone players in third successive quarter.

Local brands did relatively well during the quarter after three quarters of lull but still have a significant task cut out to reclaim the market share back from rivals. Then again, Chinese players such as OPPO, vivo and Gionee continued to outspend their rivals during the quarter especially riding high on the IPL and Champions Trophy cricket tournaments. These brands also benefitted from a refreshed portfolio in the important ₹10K-20K segment

Second quarter of the year normally sees an uptick in promotions and advertisement spend by the OEMs due to sporting events like IPL and cricketing events along with new seasons of TV shows. However, this time the promotions were extended both in offline and online channels as brands tried to clear the inventory ahead of GST (Goods and Services Tax) implementation from 1st of July.

While GST remained the key talking points during the quarter as the growing domestic EMS (Electronics manufacturing services) players were also worried about the impact of GST on local manufacturing as all previous incentives were supposed to subside under new regime. This was later addressed with the implementation of 10% Basic Customs duty on imported mobile phones and certain components by the government.

Although, shipments were impacted in anticipation of GST roll-out especially in June, retailers were quite hesitant in adding new stock into the channels during the last month even though there was some assurance from the OEMs to support pre-GST channel inventory clearance. Going forward, we estimate the market to jump back to double digit growth ahead of a festive season in 2H 2017.

Exhibit 1: India Handset Shipments Market Share in Q2 2017

Source: Counterpoint Research Market Monitor Q2 2017

               *Lenovo Includes Motorola

Market Summary:

India mobile handset market remained flat while smartphone market grew by modest 4% YoY during Q2 2017

  • Smartphone segment contributed to close to half of the total handset market in Q2 2017.
  • Featurephone segment still holding strong in India and now with the announcement of LTE based smart featurephone “JioPhone” by Reliance Jio, we estimate that conversion from featurephones to smartphones is likely to slow down in short to mid-term.
  •  Chinese brands performance remained strong and now contributing to more than half of the total smartphone shipments. It is their second successive quarter when their market share is well over 50% after they took over local players in 2H 2016.
  • Xiaomi, Vivo, Oppo and Gionee were the fastest growing smartphone brands with strong offline push and advertising Blitz-Krieg.
  • Four out of five mobile handsets shipped were “Made in India” during Q2 2017. Goverment also introduced phased manufacturing program during the quarter to increase the local value addition which is currently pegged at a low 5.6%.
  • LTE capable smartphones contributed to 96% of smartphone shipments in Q2 2017. However, in terms of installed base almost half of the smartphones are still only 3G or 2G capable.
  • This will accelerate the upgrade cycle of smartphones in short term as LTE coverage from most of the operators has expanded in the past one year.
  • Mid end segment (₹15,000-₹20,000 or US$235-$310) remains the fastest growing segment in second successive quarter there by increasing the average selling price of overall smartphone market by 16% YoY. Oppo, vivo and Samsung were the leading smartphone brands in this segment.
  • Premium segment (>₹30,000, US$465) remained flat QoQ during Q2 2017. Samsung retained the top position with 55% market share, followed by Apple at 30% market share. OnePlus, OPPO and Sony were the other players in this segment. Samsung grew 13% QoQ in premium segment due to healthy demand for its flagship S8 series.
  • The smartphones with 2GB RAM and 16GB internal memory contributed one fourth of the total smartphones shipped during Q2 2017. As memory remains the top requested feature among Indian consumers.
  • Qualcomm powered smartphones grew a healthy 40% YoY in Q2 2017. The demand for Qualcomm chipsets in mid segment by Chinese brands was the key reason for growth.
  • Smartphone segment in value terms grew 25% YoY due to increasing smartphone ASP was driven by mature users.

Xiaomi’s comeback can be attributed to strong demand for its sub-₹10K portfolio, making the Redmi Note 4 the top-selling model in the first half of 2017. This is the first time any brand has been able to topple Samsung which has held the best-seller slot for its models over the last four years due to its enormous reach and scale!

Exhibit 2: India Top Smartphone Models Q2 2017

Exhibit 3: Smartphone Price Band Growth and top models Q2 2017

Karn is a Senior Analyst at Counterpoint Technology Market Research, based in Gurgaon. He currently handles Global Devices and Ecosystems, Virtual Reality and Augmented Reality research. Karn has over 8 years of experience in the mobile device ecosystem space. He has a degree in Electronics and Communication.

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