Smartphone Shipments In India Q2 2017: Should The Industry Be Worried?

Must Read

Freshers Rejoice As Cognizant To Hire 20,000 Digitally Skilled Graduates With Eye-Popping Salary Packages

American multi-national Cognizant is gearing up to be on a hiring spree as they plan to hire...

Freshers’ Salary On The Rise In IT Companies Amid Mid-Level Layoffs

The Information Technology industry in India is recently going through some turmoil with massive mid-level layoffs taking...

How A Professional Tech Writer Can Market Your Business?

The product is ready after much designing, planning, and execution. What is it that is required now? An in-detail...

These are curious times for the global smartphone industry, especially smartphone market in APAC. The last few years have brought upon a kind of role reversal in the global smartphone market. Traditionally large markets such as the US and Europe are gradually stagnating due to increasing smartphone penetration. With limited population sizes, this leaves very few avenues for growth. The industry is now focusing its attention on the Asia Pacific region.

The large population and rapidly rising smartphone penetration make APAC market a gold mine for smartphone manufacturers. And, perhaps, the most lucrative prospect in the APAC is India. Already the fastest growing smartphone market in the world, India represents a huge amount of untapped potential. The latest data, however, from Canalys suggests that smartphone growth in India may already be slowing down.

Let us have a closer look at this outlier, and whether it presents a risk of becoming a worrying trend in the near future.

Advertisements

Smartphone Shipments In India: Fall For The First Time Ever

According to data from Canalys, smartphone shipments in India in Q2 2017 numbered at 27 million. This represents a decline of 4% YoY compared to Q2 2016 when 28.13 million smartphone shipments were recorded. Now, while a depreciation of ~4% may appear relatively small, it can seem quite devastating when put in context.

Like we outlined in a detailed analysis before, the Indian smartphone industry has grown at an unprecedented rate over the past few years. The market has experienced strong shipment growth year on year.  The shipment decline in Q2 2017 is the first recorded instance of decline in the Indian smartphone market.

The question is – what caused this decline? Has the smartphone appetite of the Indian consumer finally been satiated? Not quite.

The primary reason behind the fall smartphone demand is the implementation of the Goods And Services Tax (GST). The Goods And Services Tax is the biggest tax reform ever implemented in the country. It is a multi-stage destination based tax levied on every value addition. This allows numerous segregated state taxes to be replaced by a single national level tax. The biggest issue with GST was not the reform itself, but the uncertainty surrounding the new laws. Like we reported before, there was a lot of trepidation in the smartphone industry about what exactly GST would do. Many vendors, distributors, and customers feared that smartphone prices would increase after GST implementation.

As a result of so much incertitude, many manufacturers cut their production down by 10-15%. Numerous dealers also refused to stock products by manufacturers who weren’t GST registered. The customers were equally confused about GST. There were conflicting reports regarding the effect of GST on smartphone pricing. Some reports claimed smartphone prices would fall under GST, while some predicted increased prices. All this led to a sharp decline in smartphone shipments across the country.

Advertisements

One notable feature of the Canalys report is the fact that smartphone shipments for any of the top 5 vendors did not fall at all. In fact, Xiaomi and Vivo posted their best performance to date, with 4.8 million and 3.4 million shipments, respectively. This shows that even a massive tax reform does not affect the appeal of the established brands. This also showcases the massive fall of other brands like Micromax, Intex, Lava, etc. who are in free-fall.

Smartphone Shipments Will Rise Again

We have already established that the decline in smartphone shipments in India was caused due to the implementation of GST, not lack of appetite. Despite this minor hiccup, India remains smartphone hungry. As of 2016, smartphone penetration in India was a mere 29.8%. This amounts to around 292 million smartphone users across the country. However, with a population of over 1.3 billion, there is incredible growth potential in the market. The recent introduction of VoLTE technology and increased proliferation of 4G networks has led to a mobile revolution in India. In fact, 50% of global 4G subscribers will come from the APAC region by 2020. India and China will undoubtedly be the largest contributors to that number.

In fact, GST might even end up being very beneficial to smartphone vendors. Under the previous pricing scheme, offline vendors were often burdened by heavier taxes than their online counterparts. Now under GST, the pricing gap will disappear, meaning smartphone prices in offline stores will fall. In a country where the majority of smartphone purchases are still made offline, this will mean cheaper prices and higher sales.

GST will also open up other benefits for vendors. Distribution is expected to become leaner and more streamlined. Delivery across state lines will also become faster due to the elimination of state level taxes. Demand from local and brick and mortar retailers is also expected to rise owing to the lower tax rates.

Of course, we can also expect a large amount of pent up demand on the consumer side. Many consumers held back from purchasing smartphones over the past few months owing to the confusion perpetuated by the GST reform. Now that all uncertainties have been cleared up, smartphone demand may be higher than ever before. This is especially applicable to companies such as Xiaomi, Vivo and Oppo, which managed record breaking sales even during the slump.

Takeaways

  • The introduction of GST has provided a much-needed boost to offline sales channels. Companies like Oneplus, Xiaomi, etc. who have a mainly online distribution channel should look to set up offline stores as well to spur sales.
  • An explosive growth spurt in smartphone shipments is expected post-GST due to pent of demand and streamlined logistics/distribution.
  • While GST is beneficial to the hardware side of the smartphone industry, it will have an adverse effect on the services/app economy. App developers and service providers will now face the burden of added taxes under GST.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest News

Paytm And PhonePe Will Spend Jaw-Dropping Amount On Marketing Efforts In 2020

It has recently been reported that Paytm and PhonePe which are leading digital payment companies of India...

SEO Secret: Meta Description Drives More Clicks Than Title, Reveals Study!

If you are a digital marketer in 2020 or someone who takes a keen interest in consumer behaviour, you’d be shocked with...

Chrome Had More Than 500 Harmful Extensions: Users Beware!

Google is committed to providing a clean, safe and enhanced internet experience through its Chrome browser. In a bid to do so,...

Why Zuckerberg Endorsing A Move That Could Be Bad For Facebook!

Facebook Inc. (NASDAQ:FB) has been under the radar of several governmental institutions and privacy regulators for their overly alarming activities related to...

Microsoft Warns Millions of Windows 10 Users, And It’s Scary!

Microsoft’s Windows 10 update worries seem to haven’t stopped even after they started to secretly offer Windows 10 for free. Despite Microsoft’s...

Microsoft Study Reveals Indians Have Become Less Digitally Civilised Than The Previous Years!

With the coming age of digital boom in India, more and more people have been gaining access to the internet and have...

In-Depth: Dprime

YouTube Should Have Bid Adieu To Dislike Button Much Earlier?

Online video sharing platform YouTube can be a ruthless place for content creators targeted by 'dislike mobs'. And the site owners totally understand that...

Facebook Has Pulled Off A Masterstroke By Integrating Its ‘Family Of Apps’?

It’s indeed hard to believe that ONE man sitting at Menlo Park, oversees how nearly a third of the world’s population interacts with each...

Facebook’s Crunch Conquest: By Relying Largely On The US Market, Is Facebook Running a Risk?

Two billion! That's Facebook, Inc. (NASDAQ: FB) for you - Right when you thought that this social-media giant has already connected the entire world, it's...

More Articles Like This