The Indian handset market has been steadily growing over the last few years. While Covid-19 lockdowns and restrictions in 2020 caused a slight hiccup in this growth, 2021 saw the industry get back on track. As such, the quantum of ship­ments kept growing throughout the year. 5G smartphones also emerged as a key product during the year, as various players forayed into this field and set up manufacturing units. But while the industry is moving towards 5G smartphones, In­dian users are not yet ready to completely abandon 2G feature phones. This is because 2G phones have certain features that smartphones lack, such as affordability, durability, simplicity and extended battery life. While some of these users are un­able to afford a smartphone and a monthly internet plan, others simply refuse to convert. Reliance Jio, known for its disruptive market strategies, has been eyeing this set of non-converts and, in 2021, launched a 4G smartphone called JioPhone Next. With this, Jio aims to convince many 2G feature phone users to switch to smartphones, creating a stir in the industry.

A look at some of the key trends that emerged in the handset space during the year, the possible implications of the launch of JioPhone Next for the industry, incoming 5G smartphones and the way forward…

Key trends

According to multiple surveys, consumer purchasing habits in India have significantly improved and increased after the pandemic. According to recent market reports, mid-segment (Rs 12,000-15,000) and premium range (Rs 25,000-50,000) smartphones have been leading in sales, with a contribution of 42 per cent and 51.7 per cent handsets respectively. Further, e-com­m­erce platforms have become a trusted so­urce for customers to acquire ga­dgets, and online sales have been increasing in the mid- and premium categories this season. This is a departure from past years, when the basic segment drove most of the online sa­les. Moreover, according to a report by ana­lytics firm PredictiVu, mo­bile phone retailers witnessed a surge in demand for high-end phones priced above Rs 40,000, across India’s Tier 2 and Tier 3 towns and cities, during the year. Accor­ding to Pre­dictiVu, the split between metros and non-me­tros in the Rs 40,000 and above category was 80:20 in 2021, but is expected to narrow down to 65:35 soon. The smartphone in­dustry wo­uld have clo­s­ed this gap even quicker if co­mponent shortages had not slo­wed the supply of phones across segments and launches, especially in smaller cities.

Nevertheless, PredictiVu has warned that consumers are more likely to shop at exclusive stores than outlet stores in smaller towns and cities. It has seen growth co­ming from Surat (Gujarat) and Guntur (Andhra Pradesh), among other places.

JioPhone launch can potentially disrupt the market

Reliance Jio announced the launch of a 4G smartphone in partnership with Google during the past year. Christened JioPhone Next, the new affordable smartphone beca­me available on September 10, 2021. Acc­ording to recent industry estimates, the ad­d­ressable market for the new Jio device is as high as 140 million-150 million. This inclu­des about 60 million-65 million existing Jio­Phone customers who are likely to up­grade. Besides, Jio will be aggressively targeting Airtel and Vodafone Idea 2G feature ph­one users. In the entry-level segment, JioPhone Next will be competing with No­kia C3, Realme C20, Redmi 9A, Lava Z1 and Itel A23 Pro, among others.

While Jio evidently intends to dominate the market with its third device, the move will also give Go­o­gle an opportunity to re-enter the market after having little success with Android One and An­droid Go in the past. JioPhone Next features many Android features typically reserved for Google’s own Pixel phones. In this alliance, Jio will be responsible for driving traffic to JioPhone Next, while Goo­gle will be responsible for the underlying te­ch­­nology. Interestingly, the partnership bet­­ween Jio and Google encompasses more than the sale of smartphones. With the help of Jio, Google is hoping to un­lock its most important emerging market in the digital domain.

With JioPhone Next, users will have a greater incentive to consume audio and video content, since there will be a host of new features and interactive services available. In addition to users, the smartphone will benefit over-the-top (OTT) players. If successful, JioPhone Next will help convert up to a 100 million users of cheaper smartphones into consumers of e-commerce and apps. To fully capitalise on the opportunity, OTT players will need to think about the entire ecosystem and ensure that their content is available on the cheapest smartphone hardware possible.

JioPhone Next opens up a world of po­ssibilities for the company. But the company will have to be cautious that the phone does not meet the fate of its predecessor. For JioPhone Next to be a success, it must fulfil its promise of delivering high-end features at ultra-affordable prices. With Ch­i­nese players dominating the market, Jio must present an attractive value proposition in order to woo those 100 million customers who are yet to jump on to the smartphone bandwagon.

5G future

5G emerged as a key theme in the handset industry during the year. 5G smartphones continued to be in demand in India and shipments are believed to have been 10-15 per cent higher during the third quarter. Given the increase in demand for 5G smartphones in India, various companies took some key initiatives during the year to take advantage of this trend. For instance, in October 2021, Dixon Techno­logy started manufacturing 5G millimetre-wave (mmWave) smartphones, which were the first set of devices in the segment to be exported from India. To this end, Di­xon had set up a manufacturing unit with an annual capacity of 7 million 5G mmWave phones, and is also planning to set up another factory with an annual capacity of 30 million smartphones in Noida. Following this, in November 2021, Lava In­tern­ational became the first Indian brand to launch a 5G smartphone for Indian customers. The phone, Agni, was developed by Lava in India and has a manufacturing facility in Noida, Uttar Pradesh. The phone is meant to provide Indian consumers the choice of a domestically made 5G smartphone.

Going forward, 5G smartphones will represent more than 50 per cent of smartphone sales revenue by 2025, rising to $337 billion from $108 billion in 2021, as per a study by Juniper Research. In emerging markets, the availability of lower-tier 5G smartphones will be crucial to increasing adoption. Study results indicate that the prices of Android smartphones will be 65 per cent lower by 2025 than global prices of iOS smartphones. Additionally, Android devices, owing to their lower ave­rage cost, will help Android dominate 5G handset markets in regions such as Latin America. Further, the study predicts that iOS devices in developed markets will account for 40 per cent of the global 5G smartphone revenue attributable to North America and Europe by 2025.

Outlook 2022

Going forward, 5G devices will continue to vie for consumers’ attention despite the co­mponent supply crunch. Further, the sm­artphone market has already started recovering from the demand shock that came in the initial days of the pandemic. According to Counterpoint Research, the Indian smartphone market has been experiencing a steady growth curve over the last five. The impact of the pandemic caused the market to experience only a minor dip, showcasing its resilience. The market is now expected to experience accelerated growth, realising the true potential of the Indian market in the coming years with shipments crossing the 200 million mark in 2022. Count­er­point Research predicts that the semiconductor shortage will continue to affect the Indian smartphone market in 2022. How­ever, the situation might improve in the se­cond half of 2022.

As per Counterpoint Research, the retail average selling price is estimated to increase 13 per cent year on year, as sm­art­phone volumes are transitioning towar­ds higher price segments.

In terms of what kind of smartphones are expected to be in demand, according to Techarc, foldable smartphones are ex­pec­ted to touch 300,000 units sold during 2022. Foldable smartphone revenues are expected to grow by 60 per cent in 2022, translating into Rs 32 billion. Following the market trend, Samsung and a few more original equipment manufacturers (OEMs) are expected to launch their foldable smartphones in 2022.

As of now, Samsung is the only OEM offering commercially available foldable smartphones for the past three years. It launched the third generation Samsung Galaxy Z Fold as well as Samsung Galaxy Z Flip in 2021. Both launches received a good response from the market.

Diksha Sharma