India has emerged as the fastest growing market in the world with regards to smartphone sales. However, saturation and the consequent slowdown in China is set to drag the global growth, which is expected to slump down significantly this year.
A recent report from research firm Gartner has projected a 7% growth rate for smartphone sales in 2016, a significant decrease from the 14%+ growth figures in 2015. While the projection seem to present a stark contrast to India’s current growth rate, the slowdown in North America and China will be able to offset to bring the global average down.
India’s Smaller Average Selling Price
The real issue here is India’s smaller market size and its large rural user base which brings in a far lower revenue as compared to the urban Chinese market. Also, while the vast majority of devices being purchased in India are basic or feature phones, the Chinese population has already begun moving from mid or entry-level to premium devices. According to Gartner, smartphone shipments make up almost 98 percent of all phones sold in the country.
India, meanwhile is only just coming to terms with entry level phones. iPhones, which make up a significant portion of global smartphone sales and revenue, still have a very low penetration in the country. Apple CEO Tim Cook had recently spoke on the topic, admitting that yes, iPhone prices were a tad high.
Also, consider this for a fact — In 2013, India had a per capita GDP of around 1,498.87 USD per annum. China on the other hand had a significantly higher per capita GDP of 6,807.43 USD.
This difference in the resources available to an average person affects every faucet of his/her life — including the purchasing decisions they make. While India’s average selling price (ASP) of smartphones stands at $132, China exhibited a $257 ASP in 2015. So, even assuming the same number of phones to be sold in both the countries, China will bring in far more revenue from smartphone sales.
Because China Simply Has More People
However, even the numbers are not same — far from it. Despite its high rate of growth, India still sells only as many phones in a whole year, that are sold in an average quarter in China.
As Vishal Tripathi, a research director at Gartner sums it up,
China consumers have higher spending power compared to India. The volumes are anyways so high that India won’t be able to match it.
So the slowing growth in China, combined with the slow rate of growth in the world’s second largest market — North America — will lead to a large decrease in the global y-o-y growth, bring it down to 7 percent. As per Gartner, while 1.4 billion smartphones were shipped in 2015 — up 14 percent from 2014 — this year is expected to see 1.5 billion devices shipped. Definitely a cause for worry for smartphone vendors.
Commenting on the topic, Sanjay Kumar Kalirona, head-mobile business, Intex Technologies, said
Being an emerging market, there will always be a demand for feature phones and entry-level smartphones in India, whereas in China, majority market is replacement smartphones which have higher ASP.
That said though, there is no denying the fact that India is growing rapidly as far as smartphone sales are concerned. Analysts are projecting around half a billion smartphones to be sold in India in next three to four years, more than the combined sales of all other emerging markets put together. And lets not forget folks, a larger number of people using basic or feature phones also translates into a larger number of potential customers.