Despite festive cheer, smartphone shipments to remain weak in 2023 – Industry News

Despite an uptick in festival season sales compared to the previous year, domestic smartphone shipments to retail outlets or carriers will either remain stagnant or experience a 1-2% decline in the current calendar year, at around 140-142 million units.

According to market tracking firms, the reason for weak smartphone shipments for the second straight year in the country can be attributed in general to the inflationary stress, and specifically to higher inventory levels with the dealers post Diwali sales. Further, weaker sales in the first half of the year also weighed on the overall shipments for 2023. In 2022, the smartphone shipments fell nearly 11%.

“A range of micro financing options available on budget devices like no cost EMI offers for longer periods (from 24 to 30 months) and affordability initiatives by all major brands has given a modest start to the festive season. However, as demand softens in the latter half of the quarter (post Diwali), brands may face excess inventory challenges. Hence, the outlook for 2023 remains flat or a low single digit decline, said Navkender Singh, assistant vice president – devices research at IDC.

With regard to the festive season including Diwali, the smartphone sales grew nearly 10-15% YoY compared to 2022 in volume terms, according to analysts’ estimates. The reason for a strong sales in the festive season can be attributed to the increase in traction for premium smartphones owing to affordability factors. Further, wide variety of smartphones and discounts across all pricing segments helped the smartphone sales during festive season sales.With regard to premium smartphones, over 1.5 million units of iPhones were sold in the first week of festive season sales that started from October 8, powering an overall market growth of 25% year-on-year (YoY) in value terms, according to Counterpoint Research.

Infact, Amazon in its Great Indian Festival sales, too sold 2.5 times more premium smartphones this year compared to last year driven by affordability options such as no cost EMI and exchange offers, the e-commerce firm said.

“Amongst all smartphones sold, 60% were 5G ready and 70% of all smartphone orders came from Tier 2 and below towns,” Amazon said.

Faisal Kawoosa, chief analyst at Techarc too expects the smartphone shipments to remain flat this year at around 140 million. “The festive season went well for smartphones both in terms of value and volume. The trigger for that was upgrades from consumers, good deals, as well as the premiumisation trend.” Kawoosa said.

However, a strong traction during the festival sales will not be able to meaningfully revive the overall yearly sales, largely due to weak first half, analysts said. In the first half of 2023, the Indian smartphone market shipments declined 10% to 64 million, from the same period in the year ago period, according to IDC.

“Despite the market gaining consumer confidence in the second half, the road to recovery will be challenged by global economic concerns,” said Sanyam Chaurasia, senior analyst at Canalys. Market analyst firm CMR also expects a 1-2% fall in overall shipments for the entire year.

“The market is gradually moving towards growth and we are witnessing positive consumer sentiment during festive season sales,” said Shilpi Jain, senior research analyst at Counterpoint. “India’s smartphone market will experience growth in the coming quarter due to pent-up demand, elongated festive season and faster 5G upgrades,” Jain added.

Brand specific performance indicates that Samsung will continue to top the chart with highest market share of 17%, followed by Xiaomi, Vivo at 16% each, and realme at 14%, according to average estimates of analyst firms.

Even if the market shipments will be weak, market researchers Counterpoint and IDC estimate iPhone shipments will hit 8-9 million in 2023, a 40% increase over the 6.7 million shipped in 2022.

For 2024, while analysts estimate better growth. However, they still expect the growth to be limited by factors like inflation.

“Next year we will see a range of affordable 5G and foldable phones at the mid to premium end, but the inflationary stress and longer refresh cycles will likely limit the annual market growth in 2024,” Singh said.

According to Chaurasia, the growth in 2024 hinges on uncertain macroeconomic factors, particularly affecting the vulnerable entry-level segment.

Analysts said, going forward vendors will prioritise reducing channel pressures and building a lean product portfolio, by focusing on flagship products in certain categories.