Luxury lift: Sales of smartphones over Rs 1 lakh surge, buck mkt trend

Despite the hefty price tags, demand among consumers for smartphones priced at Rs 1 lakh or above is on the rise, bolstered by rising average selling prices (ASPs), better financing options and a wider portfolio of products.

Although this segment currently makes up just one per cent of the overall market, it is growing faster than other categories. This comes when growth in the overall market remains muted.
 

Shipment of handsets priced higher than Rs 1 lakh surged by 20 per cent and 10 per cent year-on-year (Y-o-Y) in the first and second quarters (Q1 and Q2) of 2024, respectively, according to data from research firm Counterpoint. “We are expecting between 30 and 40 per cent growth in this segment during the festival season. We may see a lot of consumers upgrading as refresh cycles kick in,” said Tarun Pathak, research director at Counterpoint Research.

While Apple and Samsung dominate this market with their iPhone and Galaxy S series offerings, over the last year, brands like Xiaomi, Vivo, OnePlus and Google have also entered the fray. They have introduced their own ‘super-premium’ smartphones, signalling an impending shake-up in the market.

Nilesh Gupta, managing director (MD), Vijay Sales, corroborated the trend. “We have seen a little more than 10 per cent growth in volume in this segment. Samsung and Apple are the main players in the Rs 1 lakh plus category. But with OnePlus and

Oppo also having offerings in this segment, we have seen the growth crossing a little over 10 per cent,” he added. Gupta felt that the foldable form factor is attracting buyers to 

this segment.

‘Super-premium’ market growth
 

Shipments in the Indian smartphone market grew just 3.2 per cent Y-o-Y to 35 million smartphones in Q2 CY24. This comes as muted consumer demand and rising ASPs continue to restrict swift annual recovery of the smartphone market, according to data from the International Data Corporation (IDC).

However, this growth in ASPs — 2.8 per cent in Q2 to $248 — has bolstered sales of higher-end devices.
 

The super-premium segment, priced at over $800, has, therefore, been growing rapidly. Momentum in the segment continued with 22 per cent growth in Q2, taking its share up from 6 per cent to 7 per cent in the overall premium market, IDC data showed.
 

The iPhone15/15 Plus/14/14 Plus together accounted for 77 per cent of shipments, followed by the Galaxy S24/S24 Ultra with an 11 per cent share. Overall, Apple led the segment with a share of 83 per cent, followed by Samsung at 16 per cent.
 

According to Pathak, affordable financing options like equated monthly instalments (EMIs) played a crucial role for sales in this segment, with 70 per cent of these devices being financed. Moreover, between 30 and 35 per cent of consumers are trading in older devices while buying premium smartphones, which brings down upfront costs further. “Consumers are riding the premiumisation wave, and are looking for devices that last them a few years. Devices in this segment offer high quality hardware, the best cameras, and even different form factors – such as fold and flip,” he said.
 

Intensifying competition
 

However, the current duopoly in the segment may now see increasing competition from rivals.
 

“The premiumisation trend in the smartphone market, led by Apple and Samsung, coupled with rising device costs is motivating China-based brands to expand beyond the mass segment,” said Navkendar Singh, associate vice-president, devices research, IDC.

The iPhone X, launched in September 2017, was the first smartphone to be launched in India at a price of more than Rs 1 lakh.

This year, the highest specification variant of Samsung’s latest Z Fold 6 smartphone has breached the Rs 2 lakh price threshold.

The device had secured 40 per cent higher pre-orders in the first 24 hours, compared to its previous iteration.

The South Korean handset maker has now started to focus on value over volume. Its ultra-premium segment (over Rs 45,000) grew by 99 per cent in Q2 2024, according to data from Counterpoint.

Competitor brands have, however, started to launch their own super-premium devices. In the last one year, rivals have launched devices like the OnePlus Open, Google Pixel 9 Pro XL, Vivo X Fold 3 Pro, and Xiaomi 14 Ultra, among others – all priced at more than Rs 1 lakh. 

Regardless, the market share of these brands continues to be around two per cent cumulatively, as of Q2 CY24.

Analysts said that Samsung and Apple will continue to dominate the market for the foreseeable future.

“It’s a halo effect for them (rival brands), to show that they have the necessary expertise to launch high-end devices. Whenever they launch these devices, sales of their affordable smartphone offerings increase as it gives an assurance to consumers that they are associated with a brand that can build flagship devices,” said Pathak.

However, analysts say that, as original equipment manufacturers (OEMs) continue to improve their hardware and software capabilities and embrace newer form factors, the tide may start to turn for incumbents.

The onset of flagship smartphones powered by generative artificial intelligence (Gen AI) may also shake up the market.

This impact is, nevertheless, expected to be gradual as manufactures inch towards higher price bands.