New Delhi: Growth in India’s smartphone sales next year may ease to its slowest pace as people hold on to their devices for longer due to the lack of innovation in new models and higher average prices, industry executives and analysts said.
There’s also been a huge pile-up of inventory left with sellers after a surge in shipments for the festive season, which may take up to six quarters to clear, they added.
Growth in the smartphone industry will be about 5% in 2020, Realme India chief executive officer Madhav Sheth told ET. That’s a level reached in 2016.
“The lifecycle of the replacement has increased by three months to 14-15 months, which will delay purchases. This means at least 20% of the possible sales will be postponed to 2021,” he said.
Even though users will upgrade to affordable smartphones from feature phones in tier 3 and tier 4 areas, their contribution won’t be more than 5% of overall shipments, Sheth said.
Growth of smartphone sales in India is expected to be about 9% in 2019, analysts said. Sales grew 29% in 2015, fell 5% in 2016 owing to demonetisation, then recovered to 14% in 2017 and 2018, as per IDC India.
Navkender Singh, research director at IDC India, said there was rapid growth in the smartphone market two years ago because people replaced their phones every 12-16 months. This cycle has now been extended to 20 months and may go up to two years.
“People are holding on to their smartphones longer because they are not getting better phones,” he said.
In addition, as the market moves towards costlier smartphones, average spending by consumers on these devices has gone up to Rs 15,000.
“It is natural that as my investment on any gadget increases, my hold period of that gadget also increases,” said TechArc’s cofounder Faisal Kawoosa.
A senior industry executive said there is concern in the market regarding the huge inventory pile up.
“We should expect some challenges… even this year (2019), growth will be 8-9%, which will further dip to 5-6% next year… there hasn’t been an organic growth in the market and it is mostly a replacement market,” the executive said.
The innovation in smartphones touted in the market is more about marketing than actual differentiation, experts said.
“Feature phone users aren’t getting any innovation and hence the migration is not that high,” he said, adding that the mid-tier segment might not see a significant upgrade in the market.
“About 40-45% of feature phone users own a device at less than Rs 1,000. So, the cost of ownership, the lack of internet literacy and the rigidity that feature phones have is holding the users from buying a smartphone,” said Singh of IDC.
To be sure, some analysts expect smartphone shipments to grow faster in 2020.
Counterpoint Technology Market Research estimates shipments will grow in double-digits to about 185 million smartphones in 2020. TechArc predicts new smartphone sales to grow 13% from 145 million smartphones likely sold in 2019.
“The installed base of smartphones is close to 500 million, while total unique handset users are 825 million, which means still a significant amount of people waiting to get an upgrade,” said Tarun Pathak, associate director at Counterpoint Research. “This upgrade will be the driver next year in the $100-$150 (Rs 7,100-Rs 10,600) category.” “This upgrade will be the driver next year in the $100-$150 (Rs 7,100-Rs 10,600) category.”
Pathak, however, is of the view that refurbished, or second-hand phones, can be a drag on growth.
“People can give older phones to their family members looking for a better phone, which could be an opportunity lost,” he said.
India’s overall mobile handset market – the second-largest in the world – will grow by a single-digit in 2020, even lower than 2019 levels, analysts said.
Counterpoint expects overall handset shipment growth to slow to 6-9% due to low demand for feature phones. TechArc said the overall market will dip 2% from 2019 levels. IDC said double-digit growth will be difficult to achieve in 2020