While Global Markets Frown, India’s Device Shipments Set To Flourish

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Contrary to the forecasted dip in global electronic device shipment, India’s device sales, especially smartphones, promise to shine, showing good opportunities for device makers, component suppliers, distributors and other involved players.

— By Baishakhi Dutta

Worldwide shipment of devices — PCs, tablets and mobile phones — will total to 2.2 billion units in 2019, a decline of 3.3 per cent year-over-year, as forecasted by a recent Gartner report. It says that globally, the mobile phone market is set to record the worst performance out of these device types, declining by 3.8 per cent. However, the challenges faced by the global electronics market will not affect the Indian device makers and corresponding components industry, as experts are of the opinion that the sales are expected to increase further in the nation, especially in the smartphone front.

Where is the real fortune?
When Gartner talks about the mobile phone market, it cumulatively accounts for the feature phone and smartphone segments. Research firm techARC predicts that India will see at least 13 percent growth in smartphone sales by the next fiscal year. At the global level, the 4G smartphone penetration has already reached the maximum. And there is not much scope for it to grow, at least this year. So, the next growth in the global smartphone market will be driven by 5G.

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Analysts are of the opinion that regardless of what is perceived, the feature phone still holds a substantial sales number. For example, if 350 million phones are sold in India in a year, then out of them, at least 100 million are feature phones. However, a more granular analysis of the feature phone shipment can be found if we go deeper into more sub-categories. A current example is the Jio phone, which has suppressed the feature phone market. This has led people to believe that feature phones are growing, which is not the case. For a better resolution, Jio phones should be categorised as a separate category.

In a broader perspective, from the volume aspect, feature phones are still there and will continue to be sold in India. But yes, the uptake of feature phones is on a decline and cannot be expected to further grow. 

So where does the real business lies? Various research firms opine that it is the smartphone market that will see the real growth in India in the coming 2-3 years and the feature phone market, which was already under a low margin and a small revenue domain, will go down. 

To support the saying further, the smartphone shipments in India grew to 37 million units, single-digit annually during Q2 2019 setting a second-quarter shipment record,according to the latest research from Counterpoint’s Market Monitor service. The growth was driven by new launches, price cuts on older devices and channel expansion across brands.

Contraction of the PC and tablet market
PC shipment in India fell by 8.3 per cent in the January-March quarter of 2019 to 2.15 million units, registering a year-on-year decline for the third consecutive quarter, according to research firm IDC.

Besides, big commercial deals, the market remained weak due to lower consumer demand, high inventory from previous quarters, and supply issues for Intel chips. However, the ongoing trade dispute between the U.S. and China — and the potential imposition of tariffs – are likely to impact the PC market this year, predicts Gartner.

Speaking about tablets, it is challenging according to techARC. When it comes to tablet, we have to look at it from an enterprise view and from a consumer view. Tablet as an enterprise device is not convenient for the generation of content. On the consumer side, tablets have become pretty expensive (in comparison with smartphones which are less expensive). Also, the tablet as a calling device has not been a success. Therefore, tablets have not found much success globally.

PC and tablets were anyway not manufactured in India. However, Counterpoint is of the opinion that in future we are going to see always-connected PC from Qualcomm. The laptops are already available in the market and is a growing segment. India will get to see such technology within the next 2-3 years, which according to analysts will boost the laptop market in India. With this always-connected PC in the picture, users will get continuous internet connectivity on their systems.

Good news for component players
Majority of the research firms strongly believe that every component player who diversifies in the right segment will grow in the coming years. Globally, a lot of smartphone component players have already started to diversify with products like wearables, kids watches and smartwatches. A lot of smartphone OEMs have launched Android watches, smart bands, fitness bands, and they are also venturing out into IoT products. Also, a lot of component players such as display manufacturers are now focusing on other segments like automotive since the demand for touch screens are increasing in the automobile sector.

So far, the data collected predicts that the real fortune lies in smartphones. Undoubtedly it is a lucrative opportunity for component manufacturers, followed by distributors to focus on this segment. In terms of exports, Africa is still a region where feature phones can be sold. Experts are of the opinion that the time is ripe for component players to gradually phase out investments out of feature phone infrastructure, and start consuming whatever volume one can produce right now and export them. And at the same time, strengthening smartphone capabilities by investing around smartphones components is the need of the hour.

Areas likely to witness demand generation
With a dip in the demand for feature phones, the physical keypads and monochrome displays will go off the market completely. Smaller RAM of 5MB or 12 MB and even 1GB of RAM, 4GB of ROM and smaller memory will not have any demand, going forward. The small screen of 1.8 inches will also lose demand completely when the active shift from feature to the smartphone will happen. 

Talking about smartphones, OLED screen, camera module will witness great demand. Higher memories will rule the market (256GB, 512GB and 1TB) and by early 2020, the first phone with 1TB memory is expected to hit the Indian market. At the same timeline, smartphones with 256GB or more are expected to cost less than Rs 20,000. Currently, the demand for higher memory has started in the market and this trend will continue to grow with the falling prices of memories.

Meanwhile, with the rise of connected cars and advanced driving techniques, more and more memory players have started concentrating on the automotive segment as these components are required in huge quantities. Apart from these, techARC predicts that demand generation is likely to happen in the broadband router, WiFi access point and switches. 

Possible prospect for Make in India
In terms of components manufacturing, there is more revenue to be made in making a smartphone than a feature phone. India is a huge potential market as a lot of people still do not use smartphones. Seeing this, a lot of companies that build components and smartphones are now migrating towards India. With respect to exports, Samsung has been exporting phones from India to neighbouring countries and the Middle East as well.

Counterpoint predicts that in India, the EMS market is going to go up with the increase in the smartphone market with the help of major players like Vivo, Oppo, Samsung, etc. who are already manufacturing their own phones in the country. Mention also be made here of the new level of demand new entrants like Xiaomi has created in a short time span.

Apart from smartphones, Indian EMS players have already started focusing on wearables, smartwatches, smart bands and accessories of smartphones. Hence diversification into different segments and manufacturing products apart from smartphones has already started according to techARC.

Gartner opines that the onset of this trend will drive investment in Made in India programs and even encourage vendors to use India as an alternative to China. Once design stages become a mainstay in India, innovation tailored to the needs of Indian citizens can also be incorporated into phones. For instance, as the 3G -4G networks transition to 5G, it will encourage the production of IoT and smart products that can be used especially for the Indian landscape.

According to IDC, considering that India is an important market for any smartphone player and the Indian government is also giving a lot of incentives on component manufacturing in India, component manufacturers need to start thinking India as a viable alternative to China for high-end manufacturing. Considering the trade tension between USA and China, manufacturers can have an alternate market where they can set up a base, address the domestic market and then few years down the line make India as a manufacturing hub as well. Of course, this requires a lot more investment because the infrastructural support and readiness might not be available as much as China right now. 

Various reports and views of analysts confirm that India can be a viable manufacturing destination and even become an export hub for making components and high-end electronics items. Alongside, India has the potential to boost its exports and start venturing out in new markets like Africa and South-east Asia. The larger picture looks bright for India. While the general global electronics market is seeing a stagnancy in innovation and consumption, the Indian market brings opportunities for designing and redesigning systems tailored to our environmental needs. Device makers and other market players have a good chance of growing business leveraging these requirements.

Major contributors:
1) Ranjit Atwal, research director, Gartner Inc.
2) Shobhit Srivastava, research analyst, Counterpoint Technology Market Research
3) Faisal Kawoosa, founder and chief analyst, techARC
4) Navkendar Singh, research director, IDC India

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