The year 2023 was a roller-coaster ride for the Indian handset industry. From fluctuations in smartphone shipments to the rise of premium devices, the industry experienced a series of highs and lows.
The year kicked off on a negative note and continued to witness a declining trend even though sales picked up in the last quarter. Despite lower-than-expected sales, the premium smartphone and 5G smartphone segments recorded growth. Meanwhile, with the rapid roll-out of 5G in India and the emergence of various 5G use cases, the focus of the handset market shifted to 5G devices. Following a period of component shortages, handset manufacturing received an impetus in 2023, as the country established new manufacturing facilities with future export plans.
A look at the key trends and developments in the Indian handset space in 2023 and future projections…
Sales trends
Smartphone shipments dipped at the beginning of the year, followed by some improvements throughout. According to the International Data Corporation (IDC), 31 million smartphones were shipped in India in the first quarter of 2023, marking a year-on-year decline of 16 per cent, and registering the lowest first-quarter sales in the past four years. According to Counterpoint Research, sluggish demand and high inventory build-up carried over from 2022, and the growing consumer preference for refurbished phones contributed to this decline. Shipments to online channels dropped significantly as offline channels were backed by new model launches and attractive channel promotions. In the second quarter of 2023, the smartphone market witnessed a 6 per cent year-on-year decline in shipments.
Segment-wise, the affordable and premium smartphone segments witnessed a 2 per cent and 7 per cent year-on-year decline, respectively, during the first half of 2023. Meanwhile, shipments in the super-premium and uber-premium segment witnessed a remarkable year-on-year growth of 104 per cent, with iPhones 13 and 14 capturing a 56 per cent share.
During the third quarter of 2023, leading up to the festive season, the Indian smartphone market showed signs of recovery, propelled by a series of new smartphone launches and attractive deals. As a result, the overall mobile market saw a marginal decline of 1 per cent year on year.
Rapid growth in the premium smartphone segment
The year 2023 saw a shift in buying trends, with consumers exhibiting a willingness to spend on high-end devices. Contrary to the overall smartphone market, India’s premium smartphone industry registered the highest growth in 2023. It grew by 112 per cent year on year during the second quarter of 2023.
As of November 2023, the average selling price of smartphones rose to $253 or around Rs 21,068. The premium segment ($600-$800) registered a 52 per cent year-on-year growth, with a 3 per cent market share. Devices such as iPhone 13/14, Galaxy S23/S23 FE and Moto Razr 40 led this change. The mid-premium ($400-$600) segment also registered a 37 per cent year-on-year growth with a 5 per cent market share. According to Counterpoint Research, the key factors driving premiumisation in India are the rise of a value-based incentive system for retailers, aggressive promotions, availability of credit through various financing schemes and the focused approach of original equipment manufacturers (OEMs). The uptake of premium devices is also influenced by the status factor.
Localisation of handset manufacturing
Following a year of component shortages, 2023 saw companies optimising their manufacturing operations to secure their positions in the long term. By the end of the second quarter, there was an increase in manufacturing output. As a result, India became the world’s second-largest manufacturing hub for mobile phones, largely attributed to significant investments from OEMs, original design manufacturers and companies specialising in mobile components and parts, according to a recent report by Counterpoint Research.
In May 2023, Xiaomi India partnered with Dixon Technologies to manufacture smartphones in the country to cater to the domestic market as well as for exports. As per the two companies, the partnership aimed to improve the component ecosystem in India. In another development, in November 2023, Dixon’s subsidiary, Padget Electronics, set up a manufacturing facility in Noida, at an investment of Rs 2.56 billion.
Recently, Ashwini Vaishnaw, Minister for Railways, Communications, Electronics and Information Technology, shared that India has experienced a staggering 20-fold growth over the past nine years. In 2014, the country was 78 per cent dependent on mobile imports, but in 2023, an impressive 99.2 per cent of all mobiles sold in India were Made in India. India is transitioning from electronics assembly to end-to-end manufacturing. The Government of India’s production-linked incentive (PLI) scheme for mobile handsets has been a key driver for local manufacturing. Since the launch of the scheme in 2020, Samsung has consistently surpassed the PLI targets for local manufacturing. Meanwhile, contract manufacturers for Apple – Wistron, Pegatron and Foxconn – have also exceeded PLI targets in recent years. The two handset players have surpassed domestic smartphone makers.
Increasing penetration of 5G smartphones
According to a report by IDC, the share of 5G shipments in the Indian smartphone market reached 45 per cent in the first quarter of 2023. Further, the average selling price reached an all-time high of $265, with the share of smartphones priced over $600 increasing to 11 per cent compared to 4 per cent in 2022. According to CyberMedia Research’s India Mobile Handset Market Review Report for the first half of 2023, India shipped around $13 billion worth of smartphones with 5G capability during the six-month period. The 5G smartphone shipment share increased to 44 per cent as compared to 29 per cent in the first half of 2022, marking a 30 per cent year-on-year growth. Further, in the third quarter of 2023, India’s 5G smartphone shipment share rose to 57 per cent, marking a 78 per cent year-on-year growth. Samsung led the Indian 5G smartphone market with a 23 per cent market share, followed by Vivo at 16 per cent.
In February 2023, Vodafone Idea Limited (Vi) partnered with Motorola to ensure seamless 5G connectivity across its smartphone portfolio. Further, in December 2023, i.safe MOBILE, world market leader for explosion-proof mobile devices and solutions, and industry leader Nokia announced an international partnership. Under the partnership, the intrinsically safe 5G smartphone IS540.x from i.safe MOBILE will be incorporated into Nokia’s end-to-end platform, along with Nokia’s private wireless and edge applications.
Government initiatives and interventions
In order to promote local talent, in June 2023, the government reportedly directed China-based mobile phone manufacturers to employ Indian equity partners in their local operations. The companies were also asked to appoint Indian executives in key roles such as chief executive officer, chief operating officer, chief financial officer and chief technical officer.
Among states, Rajasthan’s Department of Information Technology and Communication organised district camps under the first phase of the Indira Gandhi Smartphone Yojana in August 2023. The scheme involves the distribution of smartphones and data SIM cards to 4 million women beneficiaries in the state.
In addition, following the launch of Navigation with Indian Constellation (NavIC) technology, developed by the Indian Space Research Organisation, in the new Apple iPhone 15 models, the government decided to mandate smartphone manufacturers to embed the technology in all smartphones sold in India by 2025. All 5G phones are now required to support NavIC by January 1, 2025, while other phones are required to do so by December 2025.
Rising economic value of smartphones
Smartphones with internet connectivity have become enablers of the country’s socio-economic growth. Beyond communication, users rely on their devices for several functionalities such as paying utility bills, shopping and booking tickets. In its second edition of the India Impact Report 2022, Vivo India conducted a study to ascertain the “Economic Value of a Smartphone”. The study found that the financial benefit to a smartphone consumer in India is a factor of 6.1 times for every Re 1 spent on the possession of a smartphone. The economic value was calculated by comparing the total cost of ownership with the benefits of smartphone ownership.
Challenges and opportunities
While 2023 posed challenges, the Indian handset industry exhibited resilience and positive trends. The rise of premium smartphones, localisation of manufacturing and government interventions signal a positive trajectory. As the industry embraces technological advancements and navigates economic shifts, the future appears promising for smartphone vendors in India.
Sugandha Khurana
