Mobile handset market sees a widening divide as mass segment suffers

Premium buyers are flocking to outlets, but mass segment is under pressure

There has been a sharp rise in demand for and record shipments of premium smartphones, but that hasn’t been the case with the mass market segment.  

A sharp fall in shipment of feature phones and poor growth in the affordable handset market against the bumper growth in the premium segment is indicating a widening gap between them.

During the September quarter, all major premium players – from Apple to Samsung –registered record growth. Apple’s iPhone shipments grew a record 67 per cent year-on-year to 800,000 units. Rival Samsung saw a fourfold growth for its luxury segment, while OnePlus became the fastest growing smartphone brand. The overall premium segment (over Rs 35,000) grew by a whopping 91 per cent, according to research firm IDC.

The lower end of the pyramid, however, throws up a different picture. According to IDC, as consumers held back on upgrading to more expensive smartphones due to economic uncertainties, the mid-segment (Rs 15,000-35,000) shrank YoY. At the entry-level (Rs 5,000-10,000) brands like Samsung, Realme, and Itel launched new devices, but the overall segment failed to match the growth of the premium segment. As a result, the average selling price (ASP) for smartphones declined by two per cent — the first such instance in years.

The feature phones segment contracted by 30 per cent and its market share declined to 31 per cent from over 40 per cent earlier in 2020. Experts said two factors have affected demand for feature phones. One, millions of low and mid-income households that are suffering from financial distress due to the economic downturn sparked by the coronavirus pandemic, and this has adversely impacted demand for feature phones. Analysts at CyberMedia Research said, “Consumers at the bottom of the pyramid continue to be sharply affected by the pandemic”.

And secondly, e-learning and work from home have forced a section of feature phones users to shift to smartphones. Growth in entry and mid-segment smartphones remained muted.

The trend continues among mid-segment smartphone users, too. According to Upasana Joshi, associate research manager at IDC, economic uncertainties have forced mid-segment consumers to hold back on upgrading to more expensive smartphones.

From Samsung to Apple and OnePlus, recent performances by leading brands have reflected this trend. According to Asim Warsi, senior vice-president, Samsung India, its premium segment has grown the fastest, while OnePlus recorded 104 per cent growth in shipments during July-September.

According to experts, as not many are upgrading from mid-segment to premium, high-end consumers who are least affected by the economic slowdown, are now driving demand for premium devices. The new phenomena is in stark contrast to recent trends. Till recently, smartphone users who upgraded to the premium segment used to drive growth.

The nationwide lockdown left 122 million workers jobless in India, the Centre for Monitoring Indian Economy said in May. According to its analysis, about 200 million people or nearly 40 per cent of the total 520 million strong labour market, lost jobs by September. Handset industry veterans said this might have played a role in the sudden shift in buying pattern.

“Unemployment has risen, impacting the lowest rungs of society most,” said Adwait Mardikar, an analyst at Canalys. The Singapore-based research agency predicts that households suffering from economic distress will affect the long-term growth of the country’s smartphone market.