What is the current size of the Indian handset market? What are the emerging trends in this market?

According to industry experts, the Indian handset market reported revenues of Rs 359.46 billion in 2012-13. This market witnessed year-on-year (YoY) growth of 21 per cent and quarter-on-quarter (QoQ) growth of 4 per cent for the three-month period ended June 2013.

This growth in handset sales is mainly due to the increased adoption of smartphones in the Indian market. Vendors shipped a total of 9.3 million smartphones during April-June 2013 as compared to 3.5 million units in the same period in 2012. During April-June 2013, the total number of units shipped was 50 per cent more than that shipped during January-March 2013. The market for 5.0-6.99 inch screen size smartphones (phablets), grew 17 times YoY and phablets’ share in the handset market stood at 30 per cent as of June 2013 (as per IDC AP Quarterly Mobile Phone Tracker).

The key market trends are:

•   Increased adoption of smartphones by the urban youth

•   Increased share of phablets (5.0-6.99 inches)

•   Growing smartphone penetration in Tier II/III markets

•   Increased adoption of  bring-your-own-device among enterprises.

One of the key trends in the market is the emergence of devices that are suited for enterprise and personal use.

How has the smartphone market evolved over the past few years? What are the key growth drivers?

The smartphone market is probably one of the most dynamic industries in the world. It is growing in terms of application availability and improved hardware configurations.

One of the key drivers for this market is the urban youth, which is creating the demand for improved hardware and applications. Also, there is significant activity in the phablet category. These devices account for 30 per cent of the total smartphone market. Another important driver of this market is Tier II and Tier III cities. These are the true “mobile first” markets where people are experiencing the power of the internet and its social impact by using their mobile handsets.

  What has been the impact of growing smartphone demand on the feature phone market?

While feature phones still account for the lion’s share of the market, smartphones have been steadily gaining ground. The share of feature phones has been reducing. The smartphone market has witnessed unprecedented growth in the past year. According to IDC’s AP Quarterly Mobile Phone Tracker, vendors shipped a total of 9.3 million smartphones during the quarter ended June 2013 as compared to 3.5 million units during the same period in 2012.

 What has been the impact of rupee depreciation on the handset manufacturing business?

The capricious nature of the rupee has been a cause of concern for all industries that are reliant on the import of goods. It has been especially challenging for the highly competitive handset market as the margins in the mobile hardware space have reduced and manufacturing cycles have become shorter. Another issue is device obsolescence resulting from the rapid launch of products. This highly competitive market has created immense pressure on logistics and supply chains.

The volatile rupee has added to these challenges as it is difficult for handset vendors to plan their product cycles and pricing without visibility on the future of the currency. The actual impact has been in the form of irregular availability of products due to logistical issues as well as frequent changes in the market prices of products.

What is the near-term and long-term outlook for the Indian handset market?

In the near term, the handset market will keep growing, and smartphones will gain market share. The 5-6.99 inch handset segment will become the new sweet spot for all full-touch smartphones. In the longer term, the focus will be more on machine-to-machine communication.