Chinese handset makers have made deep inroads into the Indian smartphone market, cornering a combined share of above 40%.
According to the market research firm International Data Corporation (IDC), Chinese brands such as Lenovo, Xiaomi, Gionee, Vivo, OnePlus and Oppo have established supremacy over their Indian peers in the middle and lower segments of the market.
IDC’s study of 30 cities across India found that Chinese handset makers accounted for more than 40% market share in the month of October, primarily driven by 4G-enabled handsets.
In the lower end segment (below US$100) Oppo and Vivo, with their superior build quality and massive offline marketing investments in the offline channel, continue to challenge established Indian vendors such as Micromax and Intex.
The study noted that July to October 2016 accounted for more than 40% of annual smartphone sales. The festive season in India, starting in August with Independence Day and continuing until Diwali in October, drove consumer buying. “It was almost like a ‘Chinese Smartphone Diwali’ across all city tiers,” observed an analyst.
As for individual companies, South Korean smartphone maker Samsung continued to dominate the market with 26.1% market share in October, followed by Lenovo (including Motorola) with 13.4 % and Xaiomi (10.7%).
In the premium smartphone segment (US$300 and above), Apple grew further on the back of its newly launched iPhone 7 series. The Samsung Galaxy S7 Edge continues to be popular, in addition to the series of new model launches by Samsung across both offline and online channels.
The study also observed that e-commerce players have started investing more in smaller cities, improving delivery networks and moving away from deep discounts.
Demonetization to hit sales
The study, however, cautioned that the Indian Government’s decision to demonetize Rs 500 and Rs 1, 000 notes, and the subsequent cash rationing, will lead to “significant but temporary contraction” in the mobile phone market in Q4, 2016. “Due to relatively slower sales, the inventory in channel is piling up, which will take some time to be liquidated as the currency situation improves,” it added.
According to PC World magazine, Indian phone maker Lava International had cut down on production and told employees to go on leave for 10 days. Contract manufacturer Foxconn too had asked nearly a fourth of its 8,000 factory workers in India to go on paid leave for two weeks.
The cash crunch is expected to badly affect sales of low-end smartphones and feature phones, which are bought by the urban and rural poor. With cash in short supply, phones are not a priority for them.
Even among those ordering phones online, many prefer to use cash-on-delivery options offered by online retailers such as Flipkart and Amazon.