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Smartphones brace for another lacklustre festive season

The festive season typically accounts for 60-65% of India’s annual smartphone shipments, according to industry experts. (Mint)
The festive season typically accounts for 60-65% of India’s annual smartphone shipments, according to industry experts. (Mint)

Summary

Last year, smartphone brands launched an early onset to festive season sales in a bid to clear inventory and drive demand.

New Delhi: Smartphone shipments are expected to stay weak during the crucial festive season for the second consecutive year as consumer demand remains subdued in one of the world’s top markets, according to industry analysts and retailers. This is despite a flurry of new launches and a decline in the average selling price of a smartphone.

Last year, smartphone brands launched an early onset to festive season sales in a bid to clear inventory and drive demand. This, however, couldn’t save the segment from seeing one of its biggest dip in shipments in the September quarter, which precedes the festive season period. Market research firm International Data Corporation (IDC) tabulated a 10% year-on-year (y-o-y) decline in shipments during this period.

The industry analysts and retailers, whom Mint spoke with, projected smartphone shipments to remain flat during the ongoing September quarter, or even decline further.

“Smartphone shipments this year in India are expected to witness de-growth, and not just remain flat since last year. The decline in shipments is expected for the overall calendar year of 2023, with the festive season accounting the largest chunk of it," said Navkendar Singh, associate vice-president at IDC India.

The festive season, which begins from the last week of September and extends until December-end through the new year’s first week, typically accounts for 60-65% of India’s annual smartphone shipments, according to industry experts.

The industry is also seen as a bellwether for the broader consumer electronics market. According to IDC data, smartphone shipments fell 10% to 144 million units in 2022, with the second half of the year clocking shipments of 73 million units.

Tarun Pathak, research director at market research firm Counterpoint India, said in January that the decline in shipments during the festive period last year occurred due to record-high unsold inventories of more than 10 weeks. Typically, smartphone retailers keep around 3-4 weeks of inventory.

“Inventories have somewhat normalized now--down to about 7 or 8 weeks. There has been a slight uptick in demand even as the launch of new devices has seen the average selling price (ASP) of smartphones come down to between 17,000 to 18,000 now from over 20,000 at the start of the year," Pathak said on Monday. This, he said, could lead to “low single-digit growth" in smartphone shipments in the current quarter.

However, consumer demand remains tepid. Manish Khatri, partner at Mumbai-based retailer Mahesh Telecom, said device sales and consumer interest “continue to remain low".

“The mid-range price bracket of smartphones has continued to decline and remain low in demand. There are some isolated demand factors in the premium segment such as in Samsung’s Galaxy Flip series, and Apple’s iPhones. However, the bulk segment shipments remain weak, and there is no sign of revival from the previous year," Khatri said.

Kailash Lakhyani, founder and chairman of industry body All India Mobile Retailers’ Association (Aimra), said there is no indication of any demand revival so far as well as festive season offers.

“Most of the retailers continue to see lukewarm demand, and until the bulk of the discount offers commence post Independence Day, there is no sign of a rise in demand," he said.

IDC’s Singh added that a clear reason could be the void left in the market by a lack of compelling device options in the mainstream price categories of under 20,000—pushing more buyers towards the second-hand smartphone market.

“Xiaomi and Realme, two of the largest brands by volume, are likely to remain conservative this festive season, and the entire year. Xiaomi is struggling to pick up their device shipment figures, which has left a void in the market that multiple brands such as Samsung, the Transsion group and homegrown Lava are trying to fill-up. This is for devices in the mainstream market at a price range of around 15,000. However, high component costs in the supply chain are preventing brands from lowering the price of 5G smartphones to this point. As a result, buyers looking for 5G phones in the price range of 7,000 to 12,000 are moving to the second-hand market for their devices," Singh said.

Industry projections peg smartphone shipments in the June quarter at around 35 million units, which will cumulatively account for around 65 million units of smartphones shipped in the first half of the year. With a lack of demand in the market, smartphone shipments thus look unlikely to pick up pace in the second half of the year—leading to a potential decline of another 10% y-o-y, this year.

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