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Indians are holding onto their smartphones longer

Indians are holding onto their smartphones longer
5 May, 2022
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Delhi-based professional, Sutanuka Dasgupta spent about two weeks researching a phone last month. Her smartphone was about a year old and she wanted to change it. After speaking to friends, family and others, she decided to abandon the purchase, realizing instead that her current phone would last her much longer.

India’s smartphone users, who were once known for upgrading smartphones every six months, have started turning away from the market. A combination of increasing prices, lack of incentives to upgrade and more has brought upgrade cycles from six months in 2015, to 9-12 months in 2016-17 and up to 24 months in 2020.

According to experts, the time frame is 27 months now, and Tarun Pathak, research director at Counterpoint Research, said it might increase by another month or two, by the end of 2022.

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To be sure, the slowdown of smartphone upgrade cycles is a global phenomenon as well. In the US, these cycles are pegged at 33-34 months, but those markets also have higher penetration of phones, and are more mature.

According to Pathak, consumers have increasingly been buying more mid-tier phones, which is why they hold onto the devices longer as well. He also pointed out that phone firms make more trade-offs on mid-segment smartphones after the pandemic, in order to adjust for growing component prices. 

Smartphone makers have been dealing with supply side issues, consisting of increasing freight prices and a global shortage of chips for almost two years now. Industry predictions say that this shortage could continue well into the year, and last till 2024 for some industries. 

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As a result, experts said that the emphasis on mid-segment devices has become an industry-wide strategy to overcome the shortage of components. According to data sourced from Counterpoint Research, shipments of phones priced under Rs 10,000 accounted for 30% of all smartphone shipments in the quarter ended December 2021, dropping by 5% year-on-year. On the other hand, shipments in the Rs 20,000 and Rs 30,000 segments accounted for 23% of all shipments, and grew by almost 100% yoy.

“There are not many smartphones in the 7-8k segment. Samsung and Xiaomi have almost vacated the space as it is difficult to do business and stay profitable in this segment. Also, demand in this segment has shrunk,” said Navkendar Singh, research director at IDC India. 

Singh is of a slightly different opinion as compared to Pathak. He agreed that the first quarter of 2022 was a lean quarter, but said it isn’t an indicator of falling demand. Instead, he said that “organic growth of smartphones” hasn’t been happening for “quite some times now”, owing to lack of innovation and meaningful upgrades in newer phone models.

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The trend isn’t limited to the urban or tier 1 markets either. Mudit Sethia, who runs a mobile retail store in Kishanganj, Bihar, said that the highest selling phones in his store are the ones priced between Rs. 13,000 and Rs. 20,000, as opposed to the Rs. 7-10,000 phones he used to sell pre-pandemic. As a result, his buyers are buying with EMI tenures that last for at least 9-12 months.

Year 2022 will be a challenging for the industry, believes Singh. “We don’t think even H2 will be able to salvage the market as it is difficult to top 160-165 million shipments every year,” he said. “The market might actually contract for the first time,” said a top executive from one of India’s largest phone firms.

Singh further added that the only thing that could lead the market to grow in the next few years is 5G network connectivity, but it will take time for vendors to bring that to phones that sell at less than Rs. 10,000, due to growing component costs.

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Many users are turning to the used or refurbished smartphone market. According to data published by research firm Redseer data, today, the used electronics market in India is expected to double in value from $5 billion in FY2021 to $11 billion by FY2024. Smartphones are expected to account for $10 billion of this market.