The switch to smartphones – L’Express Financier
Indian cellphone makers face uncertainty as the second wave of the pandemic has further dampened the growth prospects of this segment. According to Counterpoint Research, the market for multifunction phones was down 20% year-on-year in CY20, after dropping 42% year-on-year in CY19. The core consumer group of this segment of phones, which reside predominantly in Tier III and IV cities, and rural areas, have been among the most affected by the blockages induced by Covid-19. In the second quarter of year 21, the multifunction phone market fell by 50% in one quarter.
Telecom operator Jio and other multifunction phone makers are building their budget smartphone portfolios in hopes of upgrading multifunction phone users. But it comes at a cost that is double that of multifunction phones to consumers.
Waiting for a restart
In the year CY20, Indian consumers purchased around 80 million multifunction phones. However, that number is declining. Navkendar Singh, Director of Research, Client Devices and IPDS, IDC India, says the multifunction phone market accounts for about a third of mobile phone sales in India. “In CY21, multi-function phone shipments can reach 70-75 million.”
Multifunction phone users do not replace their phones as often as smartphone users and tend to keep their devices for at least three years. Industry executives set the average selling price in this segment at around Rs 800. In addition, multifunction phones with 2G capability are more popular than 4G multifunction phones.
Nokia, a major player in the multifunction phone segment, is adding value to drive sales. “During the pandemic, we launched the Nokia 5310 (Rs 3,449) which comes with dedicated music buttons; it was sold in no time on Amazon, ”says Sanmeet Singh Kochhar, vice president of HMD Global. The company, which resurrected the Nokia 3310 in 2017 in a modern avatar, also brought back the Nokia 6310 this year, with an improved form factor.
Industry executives say that while the voice-only phone segment isn’t going away, it isn’t expected to grow much either. Tejinder Singh, Product Manager, Lava International, points out that “Currently, the universe of multifunction phone users is around 350 million and the target audience is around 500 million. With a penetration rate of 70%, it is likely that the numbers will not increase in the future, as some customers will switch to smartphones and others will buy smartphones directly, skipping the functional phone stage entirely. Lava International derives about 60% of its revenue from the sale of multifunction phones.
The smartphone push
Analysts say the sweet spot to ease the migration from the multifunction phone to smartphones is in the price range of 3,500 to 4,000 rupees. “This is where strategies such as device bundling will come into play to improve affordability for consumers in ambitious India,” said Shipra Sinha, analyst – industry intelligence group, CyberMedia Research.
Telecommunications giant Jio is expected to launch its affordable JioPhone Next smartphone soon. The phone, which is supposed to run Android 11 (Go Edition), is aimed at consumers who are using 4G for the first time. According to media reports, the price of the phone is expected to be between 3,500 and 4,500 rupees.
Itel, which has around 25% of the market share in the multifunction phone market, in September launched a budget Itel A26 smartphone at Rs 5,999, which comes with features such as face unlock. With the Nokia C01 Plus (Rs 5,999), HMD Global also wants to take a share of this market.
However, most upgrades are likely to take place via portable devices or refurbished phones. “Budget smartphones come with poor memory and specifications. Consumers in smaller markets prefer to opt for refurbished smartphones from brands such as Samsung or Xiaomi, instead of investing in affordable first-hand smartphones, ”says Jayant Jha, co-founder and CEO of Yaantra, a marketplace for reconditioned devices.
Use cases are limited unless the devices are voice activated, analysts say. “Affordability, digital literacy and literacy itself are the top three barriers for users to enter these markets,” says Shashin Devsare, executive director of Karbonn Mobiles.
Another obstacle is data consumption. Consumers in the entry-level segment are expected to spend less on data. “The JioPhone Next will have an advantage over the others as it will likely have data aggregation options just like the Jio multifunction phone,” said Prachir Singh, senior research analyst, Counterpoint Research. Other major cell phone manufacturers may therefore also need to enter into telecommunications bundling partnerships.