Budget smartphones sell like hot cakes in tepid market

This revival is happening in the context of an overall slowdown in sales of smartphones in recent years. Overall smartphone sales in India grew just 4% in 2024 year-on-year (y-o-y) after being stagnant the previous year, according to market researcher International Data Corp (IDC) India.

However, sales of phones priced at ₹20,000 and below sold 35% more in 2024 compared to 2023. Further, sales doubled y-o-y in 2024 for 5G-enabled smartphones priced under ₹20,000. To be sure, 5G-enabled phones accounted for four out of every five smartphones sold in India last year, while almost one in every two 5G phones sold last year was from the budget segment.

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Smartphone brands and sellers are hoping this trend would continue in 2025, reviving interest in one of the largest electronics categories in the country. Phones priced below ₹20,000 comprise the biggest revenue driver in an industry that generated nearly $40 billion in revenue last year—that’s nearly 30% of the domestic electronics industry’s annual revenue right now.

“The last time users from tier-II markets and beyond upgraded their phones, or bought their first ones, was in end-2021 and early-2022," said Nilesh Gupta, managing director of Vijay Sales, a multi-brand pan-India electronics retailer, adding that this year is thus within a natural upgrade cycle.

“And since the cost of 5G chips have drastically reduced now, the sub- ₹20,000 budget smartphone is easily proving to be a value purchase for non-metro smartphone users across the country," Gupta said. “With the bulk of India’s shoppers being from non-metro markets, there is a clear demand for the sub- ₹20,000 budget smartphone category."

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Meanwhile, Prabhu Ram, vice-president of industry intelligence at Cybermedia Research, pointed out that the least-expensive category of sub- ₹10,000 smartphones is also rising in sales. “Last year, this category grew 80% yearly, and next year, this could grow even further," he added.

Light amidst gloom

The spark in budget smartphone sales has not been able to take away from the larger slowdown the smartphone industry is facing.

Over the past three years, the volume of smartphone sales in India has been dipping, as buyers shied away from frequently upgrading their phones, with upgrade cycles of smartphones increasing from six months to over two years now. This is because of increasing longevity of the most-used category of gadgets, and smartphone brands struggling to offer differentiating factors in budget smartphones.

IDC’s annual smartphone sales data said that phone sales peaked in 2021 with 161 million units sold. The post-pandemic sales dropped by over 10% to 144 million in 2022, and was largely stagnant at 146 million phones in 2023. Last year, sales showed a slight sign of revival—growing 4% annually to 151 million units. Within this, sales of budget smartphones soared.

The value of volume

To be sure, sub- ₹20,000 smartphones account for nearly three out of every 10 phones (including smart and non-smart or feature phones) sold in the country. As a result, for most brands, selling these value-centric devices at a mass scale makes a big difference.

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Market leader (by volume), China’s BBK Electronics-owned Vivo, generated nearly $7 billion in revenue last year in India solely from smartphone sales, while Korea’s Samsung—ranked No.2 by volume in end-2024—generated nearly $8 billion. Failing to sell these devices for these brands could be detrimental both for India and these companies.

Consumption moves

Next year, researchers project growth of 5-6% in the overall smartphones market, while the growth in budget phones could be double that. Policy makers’ efforts to revive consumer demand, driven by the Reserve Bank of India’s lowering of the key policy rate after five years and the Union budget offering tax sops, could also prove to be beneficial, they said.

The Centre’s decision to exempt incomes of up to ₹12.75 lakh is projected to increase disposable incomes, which in turn could boost discretionary expenditures such as upgrading smartphones. Further, duty changes in mobile phone manufacturing components can increase margins for phone brands in India. However, rising dollar prices—which affect components that are still imported—can negate this. Still, overall, most budget decisions are likely to positively impact smartphone sales in the country.

Prachir Singh, senior research analyst at market researcher, Counterpoint India, said that all these moves are designed to increase consumption among consumers, considering that consumption is critical for the Centre to meet its target of a $500-billion electronics economy by 2030.

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“Each of the benefits combined should make the cost of financing cheaper for both consumers and companies, while the eighth pay commission—set to roll out in-hand by early next year—would further add money in hand," said Singh. “This will trickle down to the lower economic levels, too, which means that in the long run, mass-market categories such as the sub- ₹20,000 smartphones will be key. Brands are pushing sales on these lines already."

However, despite the growth projection, there are concerns. Manish Khatri, partner at Mumbai-based retailer Mahesh Telecom, said that there is “no organic growth" in the market—and most buyers in the smartphone space today are returning customers.

“Because of the market cycle, we will end up with the sub- ₹20,000 category seeing growth for the next two years. But will it sustain in the long run? There is no indication of this for now," he said.

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