After successive decline for last two quarters, Indian smartphone market recovers with 17 percent growth in Q2 2016: IDC India

According to the International Data Corporation's (IDC) Quarterly Mobile Phone Tracker, smartphone market revived after declining for two successive quarters by registering 27.5 million units of smartphones shipments in CY Q2 2016. Smartphone shipment posted a healthy 17.1 percent growth over previous quarter and a marginal 3.7 percent growth over Q2 2015.

Both global and Indian vendor’s shipments declined year-on-year, while China based vendor’s shipments grew at healthy 75 percent in CY Q2 2016. According to Karthik J , Senior Market Analyst, Client Devices, IDC India , "China based vendors’ shipments grew 28 percent over previous quarter of which Lenovo group, Vivo, Xiaomi, OPPO and Gionee were key contributors driving the growth. Until now, Lenovo was the only China based vendor to ship over a million units in a quarter, while this quarter saw additional three vendors joining the million shipments bandwagon. Xiaomi’s Redmi Note 3 was not only the top selling model in online channel but also a star product for the vendor contributing majority of Xiaomi’s total shipments in Q2 2016”.

“Sub $150 segment has been a strong foothold for Indian vendors, which is now facing increased pressure from both global and China based vendors. Aggressive entry of Reliance Jio with shipments of over a half a million 4G devices has captured significant share in sub $50 segment at the expense of other Indian vendor’s share” says Jaipal Singh , Market Analyst, Client Devices, IDC India.

“The premium segment (US$300+) saw vendor share movement rather than expansion as China based vendors made a significant expansion in this segment capturing around one-third of this segment in Q2 2016 from just 9% a year ago. OPPO’s F1 Plus shipments grew further helping the vendor to gain reasonable share in a global vendor dominated segment” adds Singh . Apple’s iPhone SE failed to make any significant impact in the premium segment while its previous generation iPhone 5S continued to contribute majority volume.

Online share of smartphones dipped to 28 percent in CY Q2 2016 from 35 percent in the previous quarter. “Healthy growth in the offline channel, online focused vendors expanding their footprint into retail channel followed by stringent norms to restrain excessive discounting on online platform are some of the reasons that could be attributed for online share decline this quarter”, says Karthik J . However, with festive season approaching, online share is likely to bounce back with array of new launches and offers.

Smartphone Vendor Highlights:

Figure 1

Samsung continued to lead the Indian smartphone market with 25.1 percent share, registering 10.9 percent sequential growth over previous quarter and 15 percent growth from the same period last year. With updated versions of J2, J5 and J7 released in Q2 2016, J-series devices continue to drive Samsung’s shipments.

Micromax retained second position with 19.9 percent growth over the previous quarter. Slew of new launches backed by the new marketing initiatives helped Micromax gain the market share post two consecutive declines in Q2 2016. Vendor has re-gained share in $150-$200 segment with launch of Canvas 6 series and Yu Yunicorn.

Lenovo Group ( including Motorola) with 10.3 percent growth over the last quarter, vendor regained the third position in Indian Smartphone market. Moto G4 plus and Vibe K5 Plus were the key drivers for the growth accounting more than one-third of its total shipments. Lenovo Group has extended its presence in the retail contributing to approximately one-third of its shipments.

Intex slipped to fourth position in Q2 2016 as its shipments dropped 9.8 percent sequentially and 30.1 percent over last year. While Intex is undergoing internal management changes, vendor is facing stiff competition from other Indian vendors in entry-level and Chinese vendors at mid-level. However, In Q2 2016, Intex’s cloud series helped Intex to gain a significant share in the online segment.

Reliance Jio maintained its position as the fifth largest smartphone vendor with 12.3 percent sequential growth in Q2 2016. LYF devices have entered sub US$50 segment and bundling introductory offers with Jio services helped it gain strong traction in retail stores.

Feature Phone Market Highlights:

According to Navkendar Singh , Senior Research Manager, Mobile Devices Research, IDC India and South Asia , “The rate of migration from feature to smartphone has slowed down and feature phones continue to account for more than half of the total Indian mobile phone market. 33.7 million units of feature phones were shipped in Q2 2016 with 2.6% growth over last year. Cautious spending behaviour of consumers clubbed with feature phone’s continued relevance to the target customer’s usage needs, vendors re-calibrating the channel to increase their share and relatively better margins with feature phones are some of the factors which are driving the volumes for feature phones.”

Other key market dynamics which rendered the feature phone growth in Q2 2016:

• Entry level smartphone ecosystem has mostly upgraded to higher specifications making lower memory and low-end processor technology obsolete in the market. Also, with consumer’s expectations, adding such device (e.g.: 256MB+512MB) to portfolio is no longer a feasible option for vendors.

• Difference between an entry-level feature phone and smartphone is approximately INR1000 (US$15). Vendors are finding difficulty to match the prices of feature phone and hence re-opening the market clocking good volumes of feature phones to capture entry-level/ first-time buyers.

• Decreasing footprints of large CDMA service providers was a key reason as many users have boarded a new GSM feature phone as their primary device of communication.

With the festive season approaching, the shipments are expected to hit the channel during end of Q3 2016. And hence, IDC expects shipments of both smartphone and feature phone to sequentially grow in Q3 2016.