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Cmrs-India-Mobile-Handset-4Ps-Report-2017.Pdf 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 1 | CMR’s India Mobile Handset Market 4Ps Report - 2 0 1 7 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. 2 | CMR’s India Mobile Handset Market 4Ps Report - 2 0 1 7 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’,
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