India, the world’s second largest smartphone market after China with around 750 million usersis struggling to attract new smartphone buyers as the average citizen in the country struggles to afford a brand new smartphone.
Instead of upgrading their smartphone, millions of Indian consumers are choosing to stick with their current regular phone or simply upgrade to a new model. The latter option has led to a surge in regular phone shipments in the country, despite the fact that these phones are quite old-fashioned and have only a few features compared to smartphones, which can meet most of the on-the-go computing needs of a typical buyer.
According to data shared by market research firm Counterpoint, traditional phone shipments in India saw a 10% year-on-year growth last year, compared to -31% in 2022. This growth comes as existing traditional phone buyers are resisting the idea of picking up a new smartphone.
In the total traditional handset market, 4G traditional handset shipments in India have increased from 9% in 2022 to 25% in 2023. However, 2G traditional handsets still dominate the Indian market, with a share of 75%, according to Counterpoint.
According to Counterpoint, Indian telecom giant Reliance Jio dominates the 4G traditional handset market with a 27% share, followed by Transsion Holdings-owned Itel and Indian handset maker Lava with 24% and 18%, respectively. The telco offers a range of models in this segment as well as dedicated tariff plans and access to digital services, including the country’s real-time payment system, Unified Payments Interface, and apps such as JioCinema, JioTV and WhatsApp to attract the masses.
However, Tarun Pathak, research director for devices and ecosystems at Counterpoint, told TechCrunch that Jio’s 4G legacy phones have hampered smartphone adoption in the country to some extent “as consumers are now able to get basic apps on legacy phones themselves.”
Jio plans to launch 5G phone to capitalize on trend
Jio, the India’s largest telecom player in terms of subscriber base and revenue, is quietly planning a 5G feature phone as brands face challenges in attracting new smartphone buyers in the South Asian market, TechCrunch has learned exclusively.
The telecom operator owned by Indian conglomerate Reliance Industries has been selling traditional phones for years and migrated to smartphones with Google in 2021. But its first smartphone was too expensive for its mediocre specifications and didn’t help shake things up. Today, Jio sees regular phones as the most powerful weapon it has to get phones into the hands of as many people as possible in India.
Jio’s 5G phone will run on Linux-based KaiOS operating system, which already powers the operator’s existing lineup of regular phones. Contract manufacturers Dixon Technologies and Neolync are currently prototyping the phone, sources said.
The phone is expected to be announced at Reliance’s upcoming annual general meeting in August, but it is unlikely to be ready for the mass market anytime soon, according to sources. The pricing of the phone is also among the issues that Jio is yet to decide.
Sources familiar with the matter told TechCrunch that the Mumbai-based telecom operator is in initial talks with Qualcomm for the first version of its 5G phone. However, other chipmakers could be involved in the final device as discussions over its development are still ongoing.
Qualcomm denied any involvement in discussions with Jio when contacted by TechCrunch this week. A spokesperson for Reliance Industries declined to comment.
Along with the new 5G feature phone, Jio plans to launch its 5G Android tablet and a 5G smartphone this year, two people familiar with the telecom operator’s plans told TechCrunch.
Dixon Technologies and Neolync did not respond to requests for comment.
So far, Jio offers a range of 4G devices, which includes the JioPhone Next as its first Android smartphone. The telecom operator, however, is looking to upgrade its portfolio with 5G devices as it aims to grow its telecom revenue and monetize 5G connectivity. Jio, along with rivals Airtel and Vi, Customs tariffs have recently increased in the country to increase their subscription revenues. The operator is also should separate from Reliance and be listed as a public company on Indian stock exchanges with a valuation of $112 billion by next year.
Jio’s journey with classic phones so far
In August 2017, Jio unveiled its first 4G feature phone, Jio Phonebased on KaiOS. Shortly after its launch, the JioPhone has become the country’s best-selling classic phoneThe candybar phone also later received support for popular apps like Facebook, WhatsApp, and YouTube to expand its usage.
In 2018, Jio introduced the next-generation phone with a QWERTY keyboard. However, the JioPhone 2 could not repeat the success of the JioPhone due to its limited availability and appeal.
Last year, the telecommunications operator introduced the Jio Bharat as a $12 classic phone series to revive its presence in the classic phone market. It has also updated the original JioPhone with a facelift called JioPhone PrimaThe launch of the new models has contributed to the growth of the 4G mobile phone market in India.
Why are millions of Indians not buying new smartphones?
The Indian Smartphone Market experienced growth of more than 11% over one year In the first quarter, the third consecutive quarter of shipment growth, with 34 million smartphones shipped during the quarter, according to IDC. However, unlike the low-price segments (between less than $100 and $200), the super premium segment (over $800) saw the highest growth of 44%, registering an increase in its share to 7%. It was dominated by the latest and latest generation iPhone models, followed by the Galaxy S24 and Galaxy S23 families.
However, the entry-level segment (under $100) share of the Indian smartphone market declined 14% year-on-year to 15%, from 20% a year ago, according to IDC. It accounted for 26% of the overall smartphone market in 2020 and 20% in 2021.
Market experts believe that the main reason for the sharp decline in entry-level smartphone shipments is the reluctance of mainstream phone users to switch to affordable smartphones.
Navkendar Singh, associate vice president of devices research at IDC, told TechCrunch that about 350 million people in India still use a traditional phone, and 50% of them own a model that costs less than $18. “Since they can’t afford a smartphone, they’re replacing their traditional phones,” he said.
Singh also noted that smartphone penetration in India is less than 50%, and has remained flat over the last two years, although the market has seen some growth in smartphone shipments post the COVID pandemic.
“The transition from regular phones to smartphones is not easy for some consumers,” said Pathak of Counterpoint, adding that senior citizens and people from low-income groups and blue-collar jobs are not switching to smartphones in the country.
“The price difference between smartphones and regular phones is still large enough to prevent users from easily switching to smartphones,” he said.
According to IDC, the average selling price (ASP) of a smartphone in India is $255. It has increased by over 54% from $165 in 2020. The ASP of smartphones in India is only about 31% compared to $826 in the US
Yet, millions of people struggle to afford a smartphone in India due to their low disposable income.
“Although India has one of the cheapest smartphones in the world, as a percentage of users’ income, it is less affordable than that of the US and the UK,” according to a report titled State of Digital Economy in India by the Indian Council for Research on International Economic Relations and Prosus.
Smartphone brands are offering financing options to attract buyers. However, Singh told TechCrunch that this measure has so far only helped existing smartphone consumers upgrade their models.
