5G enabled handsets will play a key role as India gets ready to rollout 5G services in near future and the revenue-led growth in 2022 will be driven by shift to higher price bands and premiumisation, as per a forecast by Growth from Knowledge (GfK).
The GFK release says that after a significant drop in revenue in 2020, 2021 started off positively for the Indian smartphone industry. In the first and second quarters, the market recorded growth in revenue of 37.5 percent for offline and online combined, compared to the same period of the previous year.
It says that however, this development levelled out over the course of the year, resulting in only a slight revenue increase of 8.8 percent in the second half of the year.
“Even though the Indian smartphone market ended 2021 with an overall growth in revenue, it needs to be emphasised that growth in second half of the year was significantly lower than the first half and the mode of consumer purchase also varied. Offline channel declined by 2.3% in the second half of the year, while online grew by 28.7%. Shifting consumer buying preferences, persistent price pressure and supply-led issues due to semiconductor chip supply are some of the key reasons for this lopsided growth,” said Kartik Vasudevan, Strategic Accounts Director – India, GfK.
As per GfK Consumer life, 62% of surveyed urban Indian consumers, especially the millennials and Gen Z, are looking for technology which “knows them”, “gives recommendations and takes actions on their needs”. It is this trend which is driving consumers to buy new smartphones which are not just faster or powerful but also easier to use and is part of their daily hustle.
At a total market level, the average selling price of handsets has moved up to 12.3% in 2021 vs 2020 for both offline and online channels combined, it says.
Buying new tech products is one of the most important ways of pampering self for millennials and Gen Z and this will be one of the key factors to drive premiumisation.
The report says that the contribution of +30K handsets in 2021 stood at 19% by value against 15% in 2020.
“The interesting part is that while the contribution of +30K handsets grew at a total level in both channels, within the offline market, premiumisation is no longer a big city phenomenon. In 2021, the contribution of Tier 2 and below cities stood at 60% by volume which indicates that more premium handsets sell in Tier2 and below in offline market,” the release by GFK read.
It further predicts that with 5G services expected to start sometime in near future, consumers will future proof their purchases with 5G enabled handsets. This is also expected to drive up the average selling price. While the average selling price for smartphones was Rs 14,806/- in 2021, prices for 5G handsets were 117% more. In 2021, the contribution of 5G handsets was 12% by volume, it is slated to cross 40% in 2022.
The rapid expansion of 5G handsets is expected to drive the premiumisation of the market. Although 5G is an important factor influencing the market, its potential has not yet been fully exploited. 5G will be very important to drive some of the latest technologies of voice and camera applications which would be AI driven.
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