Contents 1. India Mobile Handset Market 2017 ...... 1 Introduction ...... 1 Outlook ...... 2 Market Standings ...... 3 The Leader...... 3 The Chinese LOVE Affair...... 3 The Indian MILK ...... 4 4Ps ...... 6 2. CXO View ...... 7 3. CMR Telecoms Research Group ...... 15 Team ...... 16 4. About CMR ...... 17
1. India Mobile Handset Market 2017
Introduction Year 2016 ended with a stress for the industry. A stress, for long term good, where each and every handset player is more than willing to bear it for nation building. However, the initial months (3 to 4) of 2017, keeps them busy in rejuvenating the market to re-rail the things. The other challenge for them, which again they are willingly ready welcoming, is the implementation of GST. As per the inputs available so far, GST is going to push the prices of handsets in the range of 15 – 25% which will squeeze the demand to some extent. However, the timing of the implementation of GST will be crucial with Finance Minister first keeping the window of April to September open, while the recent indications are of around July.
For the mobile industry September and October are generally the best months in terms of shipment as well as sales. So it would be in the interest of the industry if GST is implemented before July so that price restructuring, if any, is ironed and absorbed by the peak season.
We had said that year 2016 was the year of ‘Transformation’ for the Indian mobile handset industry. Transformation of business models, transformation of products, channels as well as outreach. This is where we saw the industry busy in for the whole year. However, this transformation did not happen to the extent as expected in case of Featurephone to Smartphone uptake.
In 2017, we expect this transformation to continue with emphasis on ‘Expansion’. Based on our analysis and interactions with the CXO’s of leading brands in India across Feature as well as Smartphones, representing Tier I Global, Indian as well as Chinese handset makers, all their energies are going to be around expansion. Hence, 2017 would be the year of ‘Expansion’ for the Indian mobile handset industry.
We see Expansion happening on two fronts:- i) New Market ii) Widening of Existing Base
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The new market development will explore new market segments by way of new technologies, new price ranges as well as new geographies (Tier II & III). It is expected to see lot many activities from all major handset developers on this side to achieve their individual as well as industry targets.
However, the critical one would be to better the existing things by widening the scope of whatever has been initiated in past couple of years, especially in 2016.
Outlook CMR estimated the volume size of the India Mobile Handsets to be close to 265 million for the calendar year 2016. As per the preliminary findings for the year, the shipments clocked 262 million units of which Smartphones accounted for 113 million (43%) and the remaining 149 million were Featurephones. Despite ‘turbulence’ in sentiments towards the end of year, the shipments did not see a proportionate hit as there was very little window for handset makers to realign the shipments through the value chain. However, the demonetization did result in inventory build-up in the range of 25 – 35% for various brands in different categories of mobile handsets.
As a result of this, CMR expects contraction in the shipments for 1Q CY 2017. At the same time the handset makers will try to catalyse the sales by offering discounts and schemes immediately after the Union Budget 2017 is announced, which in all probabilities is going to be favouring the handset industry to aid rejuvenation.
CMR reads the situation arisen out of demonetisation as a temporary situation and the market is poised to bounce back due to the inherent strengths that India mobile handset market enjoys. To couple with it, as the telecom services scape realigns only to strengthen, CMR expects compelling 4G services being offered only to further entice the subscribers spurring the growth. Further, the Digitisation as well as Digitalisation is only going to propel the Smartphone adoption.
The market is estimated to ship 270 million mobile phones in 2017, out of which 130 million (48%) will be Smartphones. Though the crossover may still not happen in 2017, in terms of Smartphone shipment proportion exceeding Featurephones, they will finish very close to each other during the year.
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Market Standings The Leader Samsung continues to remain the leader and its immediate next ‘floating’ competitor is still half the size in market share by volume. In 2017, Samsung will still continue to dominate the space in the overall as well as Smartphone market segment. However, as we see most of the action taking place this year in sub ₹ 10,000 – the Affordable Smartphone segment, Samsung will have to consider further strengthening this low value high volume segment by offering a wide range of platform. Our suggestion for Samsung would be considering launching an entire range of series of Smartphones for the Affordable segment to cater to the expected surge in demand for the entry level Smartphones as India leap jumps on the Digital pathway, while they ‘resurface’ in the premium categories through the flagship ‘S’ and the newly launched ‘C’ series.
The Chinese LOVE Affair Chinese brands have not only brought laurels in the Smartphone segment over the past couple of years, they have also helped the Indian Smartphone market to remain abuzz and alive in 2016. Barring Lava from the domestic stack of brands, none of the Smartphone brands was seen spending heavy and consistently on advertising creating a ‘vacuum’ in the visibility and branding space. It was all filled through the spending of Chinese brands, at times out of proportion in the views of many.
Among the Chinese brands – Lenovo, Oppo, Vivo and Xiaomi (LOVE brands) have carved out a strong position in the Indian market. Collectively they shipped 75% of the Smartphones from Chinese brands. Other brands like Honor (Huawei) started off late in full swing, while OnePlus is a niche brand, limiting their addressable market, hence the market shares.
These LOVE brands have really connected very well with the youth of the country, Be it from the perspective of what youth expect out of their Smartphones, or how best to connect with them through Digital as well as Traditional media and promotional activities, Chinese brands have weaved the whole piece were very that reaped the benefits for them in a short span of less than 2 years.
However 2017 will be difficult for them from two fronts. One is about them being able to keep the momentum of magnitude of spend going to remain visible and impact worthy as before. The second and even important one is to strengthen in the Affordable (< ₹ 10,000) Smartphone segment. Chinese,
3 | CMR’s India Mobile Handset Market 4Ps Report - 2 0 1 7 especially these LOVE brands have been popular among second time Smartphone users. These brands hit the ‘Value for Money’ segment which propelled Indian mobile users, especially the youth to upgrade / replace in this segment of ₹ 10,000 – 20,000. This is from where we saw big success for Chinese brands, primarily these LOVE brands.
In 2016, Smartphones were driven by replacement / upgrade and in 2017, the thrust would be about widening the base and bringing in more and more mobile users to a Smartphone. The entire ecosystem starting off from Government to various players will be aggressive about having more new users on Smartphones resulting in a lot of activity in sub ₹ 10,000 segment of Smartphones. Among the LOVE brands, Lenovo and Xiaomi are the two having decent presence in Affordable Smartphone segment. This situation will open up a new set of challenge to these LOVE brands in general and Oppo and Vivo in particular where the focus has been more on above ₹ 10,000 Smartphones of ‘Value for Money’, ‘Premium’, and ‘Supremium’ segments.
The Indian MILK Mothers always complain of teens not having Milk. Exactly that is happening in the Smartphone space in India. The Indian brands of Micromax, Intex, Lava and Karbonn, which cumulatively shipped 69% of the entire domestic brand shipments, have seen challenging situations in 2016, for not being able to connect to the youth very well. Youth preferred value for money by having more and the latest at less, which was not catered by the Indian brands’ portfolio. Over it, the platforms where youth are actively and intensively present for Smartphone decisions were not engagingly pursued by these brands as against their Chinese counterparts. This affected their visibility considerably taking them down the zone of consideration of any Smartphone buyer.
2017, sees a turn of tide for these MILK brands, for first they having realised the wrongs of a couple of years as well as market dynamics again favouring new Smartphone market development rather than the replacement and upgrade phenomena. It is not that the opportunity will not be there for upgrade / replacement at all. However, the greater opportunity definitely lies in the new Smartphone market development in 2017.
We expect some shake-up with these MILK brands in 2017. First, there will be a definite No 2 for the Indian mobile handset industry in 2017 ending the ‘floating’ challenger phenomena of 2016. One among these MILK brands will definitely grow exponentially while at least one more brand would see
4 | CMR’s India Mobile Handset Market 4Ps Report - 2 0 1 7 steep fall in stature. The remaining two brands will be average performers with fluctuating market standings through 2017.
Collectively, the biggest challenge for Indian brands in general and MILK brands in particular will be to connect with youth while building strong position among the new Smartphone users.
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4Ps Below is the CMR perspective within the framework of 4Ps for 2017 highlighting the major trends to take place during the year. Product Price Promotion Place . Battery will be among the . In terms of opportunity, 2017 will . The Indian brands in particular . Barring a few niche brands, there anchoring specs for the year 2017 see a comeback of sub ₹ 10,000 will see a comeback in the is going to be an equal focus on where almost all the major handset (Affordable) Smartphone spending levels for promotional offline as well as online channels makers will focus. There will be segment to cater to the rising activities. These will be primarily of selling. innovations on the front of adding need of Digitalisation in India at through new age mediums of . Metros and Tier I cities will be more capacities to the battery as individual levels. digital marketing. However these primarily served through online well as rapid charging technologies . The other exciting segment will be integrated and mode while companies will expanding through the ‘Value for where all players see a role is the complimentary promotional expand to the Tier II and III Money’ as well as the high end of ‘Value for Money’ segment of ₹ strategies interweaving the markets by establishing and ‘Affordable’ Smartphone segments. 10,000 – 20,000. This is primarily traditional with the new age strengthening physically. . Imaging is another area where a lot to keep supporting the upgrade / mediums. . There will be launch of online of innovation and improvements replacement opportunity and . The traditional mediums will be exclusive models and series from are expected through 2017. The also excite the market by adding leveraged for reaching out to the several brands. However, the innovations in the camera are to and bettering existing under-served markets of Tier II ‘Online Only’ trend will see support improved Selfie specifications aiming the youth and III cities and towns where erosion towards ‘Online First’ and experiences, support of IRIS population. handset makers will focus on the brands will dilute the online scanning and enabling AR/VR in the . Due to expected continued trend expanding the Smartphone base exclusivity status by either premium segments. of rising cost of inputs, especially from the already existing delayed offline launches or with . RAM is another area where we are displays, and the change in tax Featurephone users. setting up of experience stores. going to experience continuing structure after GST . Within Smartphones we shall see progression up the ladder. implementation, there is going to a strong uptake of technology . Other interesting areas of be an increase in the selling price driven promotions that will be improvisation include 4K resolution of phones across all segments. much localised and experience in premium segment, introduction As per the present understanding based in nature. of wireless FM radio, support of of the implications of the GST, NFC in low end Smartphones, the prices could go 15 – 25% fingerprint sensor inclusion in upward through 2017. Affordable segment and beginning of sensitisation towards security by actually seeing some security layers deployed on Smartphones.
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2. CXO View
“The domestic demand for mobile handsets in India is expected to witness a robust growth in 2017, especially from the 2nd Quarter, almost like a ‘V’ shape recovery.
The year 2017 is going to be a crucial year as far as continuation with the manufacturing momentum witnessed in the mobile handsets and components’ sector is concerned. Further based on institution of the Phased Manufacturing Program (PMP) roadmap, whereby 5 more components of mobile handsets viz. die cut parts, mic and receivers (speaker), mechanics (metal and plastic mechanics), key pad and USB cable will be brought under the ambit of the differential duty regime to help widen and deepen the components manufacturing eco-system.”
Pankaj Mohindroo, Chairman – FTTF and National President – Indian Cellular Association (ICA)
Handset Maker CXOs Ordered Alphabetically by Company Name “The emphasis on design and camera was visible in 2016 and is likely to be reflected in the products that will be launched in the coming year as well. In addition to design engineering, we anticipate advance functionality of AR and VR, which can recognize and map physical spaces, track objects as well as project virtual effects in a real- world setting and much more. Also, with an increasing number of users embracing a digital life and even accepting digital currency, online and hardware security will remain a trending topic. It would be fair to expect manufacturers to include more features that help the netizens experience the digital world in a safe and secure manner.”
Peter Chang, Region Head – South Asia & Country Manager, ASUS India
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“As the Smartphone market continues grow in size and diversity, channel strategy will play a key role in any brand’s success in India. It is important to have an omni-channel strategy with the right mix of online and offline so that products can reach the right target market.
We really see 2016 as ‘the year of the app’ and the services increasingly available to people in India to enhance lives and work. Though with this ‘app explosion’ and rapid Smartphone adoption, we have also seen new challenges like mobile malware.”
Narendra Nayak, Managing Director, Blackberry India
“I am confident that the negative impact of demonetization at the end of 2016 calendar year will be overcome and significant new growth will be seen in the Indian economy in 2017.”
Suneet Singh Tuli, Founder and CEO, Datawind
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With an increasing adoption of IOT Smartphones will lead the way for augmented and virtual reality technologies as consumers increasingly make use of social media, apps and online for a more customized experience.
We feel that the Mid range and Premium segment will continue to rule in 2017 as well for value and not affordability will be key aspects in customer decision- making.
Faisal Siddiqui, President, South-Asia, HTC
“Popularity and penetration of 4G would fuel the Data consumption as well as Smartphone uses. Consumer can experience more upgraded feature in budget Smartphone. Popularity of Digital Payment and mobile wallet service will certainly added momentum in this Smartphone growth story, and earlier implementation of GST would help the handset industry in macroeconomic level.”
Mohammad Gyasuddin, Managing Director, Hi-tech Cellphone Pvt. Ltd.
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“Digital revolution in India has further led to a paradigm shift from 3G to 4G, and to tap this trend various mobile players are offering innovative and affordable devices bundled with offers and cost-effective VAS services. By focusing on mobile handset manufacturing, customization and joint ventures, we’re going to see companies strengthen their presence in the mobile market in the years to come. We are confident that this will bring efficiency not just for Intex, but all mobile players to enhance brand value to consumers, be it from their products, price or services, both at online and offline platforms.”
Nidhi Markanday, Director & Business Head, Intex
“2017 will be a breakthrough year for the Indian mobile phone segment, indicating greater technological innovation and consumer adoption. We at itel believe that budget Smartphones with 4G/LTE and digital technology will break free from its urban and tier-1 strongholds and empower aspiring consumers in semi-urban and rural geography.
If 2016 was the year that the ‘Digital India’ vision gained major momentum, 2017 will build upon that start and drive large-scale migration onto the digital platform to set the foundation of a truly empowered, digitally-driven India.”
Sudhir Kumar, CEO, itel Mobile, India
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“2017, we believe will be a year of growth for the mobile handset industry with newer technologies being available at affordable price points. The technologies such as 4G are expected to lead to deeper penetration of mobile handsets across the country. The focus will be on enhancing consumer experience with quality products which cater to the needs of consumers across demographic be it camera, speakers, fingerprint sensors, or battery life.”
Gaurav Nigam, Head-Product, Lava International Ltd.
“We will continue with our challenger brand approach and stay focused on creating experiences for customers by offering products that address the real need of the target audience rather than getting into the specifications race.
Indian Smartphone market is very dynamic in nature and the key is to come up with innovative products, future technology at a good price point and brand’s success will depend a lot on the amalgamation of these factors. Going forward, our strategy is to maintain our online leadership and be among the top three players in the offline space.”
Sudhin Mathur, Executive Director, Lenovo Mobile Business Group, India
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“As Technology is bringing the future closer and simplifying what is complicated, the innovations in the handset space will be directly proportional to what convenience the customers demand. The focus in 2017 should to be on providing solutions to the consumers using their phones as a life hack.”
Shubhajit Sen, Chief Market Officer, Micromax Informatics
“2016 has been nothing short of a war-front between Smartphone players. Consistent, deep spends from Chinese brands have reaped huge dividends. While several home- bred brands are under significant pressure to sustain sales numbers, 2017 will be no different – it will be more important than ever to discover those niches that will offer a distinct advantage over others – else, survival will be at stake if one tries to be ‘everything to everyone’.”
Ankush Chatterjee, Vice President, Marketing & Alliances, Obi World Phones
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“OnePlus is a global technology brand with a focus on premium Smartphones. Our focus this year is to set new benchmarks with our latest flagship and strengthen our local business through local production and superior customer experience.”
Vikas Agarwal, General Manager, India, OnePlus
“2016 has been a phenomenal year for OPPO Mobiles, and we have received an overwhelming response from the Indian market for our products.
Keeping in sync with this growth, we will continue to provide the best camera phones, especially best selfie- taking experience in 2017 for the youthful consumers. In 2017, we will further strengthen our focus on youth through entertainment and sports marketing. In 2017 we expect the industry to grow further which means consumers will experience new technologies and innovations.”
Will Yang, Brand Director, OPPO India
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“The Overall expectation from 2017 is to innovate and engage our users. The idea is to build a differentiator for our brand for consumers and bring them the best of software and hardware amalgamation in our phones.”
Shubhodip Pal, COO YU Televentures
“When the country is moving towards digital lifestyle and super fast connectivity with the adoption of 4G enabled devices, we, at Zen mobile also want to play an important role in this transformation by offering a portfolio of affordable 4G devices under ZENERATION 4G and become a prominent player in this category.”
Sanjay Kalirona, CEO Zen Mobile
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3. Contributing Companies
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4. CMR Telecoms Research Group
CMR’s Telecoms Research Practice has been offering market intelligence and consulting support to its clientele across the ecosystem – be it vendors, operators, VAS providers, Chipset companies and the government. With its flagship intelligence report on the India Mobile Handsets market, CMR offers insightful research services for devices across India, Bangladesh, Sri Lanka, Indonesia and Vietnam. Pioneering the monthly reporting of market trends, CMR has been ably assisting our clientele with the fast changing trends, expectations and emerging needs. Some of the off-the-shelf offerings of CMR Telecoms Research Practice include: . Mobilytiks . India Monthly Mobile Handsets Market Review . India Quarterly Tablet PC Market Review . India Monthly DataCard Market Review . India Quarterly LTE/4G Device Market Review . Sri Lanka Quarterly Mobile Handsets Market Review . Bangladesh Quarterly Mobile Handsets Market Review . Indonesia Quarterly Mobile Handsets Market Review . Vietnam Quarterly Mobile Handsets Market Review Besides, the team conducts consulting and ad-hoc research projects and some of the flagship engagements include: . India Mobile Data Services Consumption Study for Top 3 Telecoms infrastructure providers . India Telecom Equipments and Services Annual Study for 2013 and 2014 for Voice and Data . Consulting Services for India Mobile Handsets market entry for an IT trading brand
Team
Faisal Narinder Krishna Anand Priya Hemang Kawoosa Kumar Tanvi Amit Menka Mukherjee Shipra Sinha Singh Mudgil Principal Lead Sharma Sharma Kumari Analyst Analyst Research Research Analyst Analyst Analyst Analyst Analyst Associate Associate
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5. About CMR
CMR offers industry intelligence, consulting and marketing services, including but not limited to market tracking, market sizing, stakeholder satisfaction, analytics and opportunity assessment studies. Its bouquet of consulting services includes incubation advisory, go-to-market services, market mapping and scenario assessment services. The services offered by CMR encompass industry verticals of Information Technology, Telecommunications, Electronics, Semiconductors, Life Sciences, and other emerging and overlapping technologies shaping our lives in offices as well as at homes. CMR is servicing domestic as well as international clientele in India and few global destinations. The clientele serviced represents SMBs, Large Enterprises, Associations and Government. CMR’s core value proposition encompasses a rich portfolio of syndicated reports and custom research capabilities across multiple industries, markets and geographies. CMR’s forthcoming studies include stakeholder satisfaction surveys, mega spender assessments and market mapping studies for these domains. A part of CyberMedia, South Asia’s largest specialty media and media services group, CyberMedia Research (CMR) has been a front runner in market research, consulting and advisory services since 1986. CMR is an institutional member of Market Research Society of India (MRSI). For more details, please visit http://www.cybermediaresearch.co.in or http://www.cmrindia.com.
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