KOLKATA/NEW DELHI: Smartphone prices have almost halved since the start of the year due to cutthroat competition, relentless introduction of newer and more efficient technologies and ever-increasing demand in a booming Indian economy where rising incomes make more and more consumers go for higher-end products.
Smartphone — or feature-rich handset that can support multi-tasking, mobile office, mobile internet , push mail and run different kinds of applications — is the fastest-growing category in the world’s fastest-growing mobile phone market.
An entry-level smartphone now costs just about Rs 6,500, down from Rs 12,000 last year. And handset makers such as Nokia, Samsung, LG, Dell, BlackBerry and HTC say the prices will plunge further next year on higher volumes as more people access the internet on mobile and the new third-generation (3G) mobile telephony, which brings high-speed internet and live video streaming to handsets, kicks in.
“Smartphones are set to become the next area of competition as the category is growing at the fastest pace,” says D Shivakumar, vice-president and MD of Nokia India, the largest mobile phone maker in the country as well as the world.
Analysts feel the availability of a wide variety of operating systems for smartphones will further bring down prices and help it to become a mass market product, driven by more than 100% teledensity in urban markets, upgradation purchases and the launch of 3G.
“While first-time users are not generally expected to buy smartphones, but with increasing disposable incomes, backed by the market phenomenon of falling price points, smartphone shipments to this segment could see an increase in the coming quarters,” says Naveen Mishra, lead analyst (telecom) at research firm IDC India.
Then there is the much-awaited 3G rollout. Earlier this month, on Diwali day, Tata DoCoMo became the first private operator to launch 3G services in the country. While Airtel, the country’s largest telco, is expected to enter the market before the end of the year, others are expected to follow suit within months.
According to industry estimates, the penetration of smartphones in India has grown from 1% of the total market in December 2009 to more than 4% now. And this is expected to more than double by end-2011.
A slew of aggressively priced smartphones is entering the market across various platforms. Nokia’s 5233 model, which runs on the Symbian operating system, is selling for Rs 6,300, while Taiwanese handset manufacturer HTC recently launched HTC Smart, running on Java-based Brew OS, at Rs 7,000.
India’s second-largest mobile phone brand Samsung launched smartphones on its Bada and Google’s Android platforms starting at Rs 8,800. The other Korean electronics major, LG, has cut the entry price for its smartphones to Rs 12,000 and plans to bring it down to Rs 7,500 next year.
A fortnight ago, personal computer maker Dell forayed into 3G smartphone market with XCD28 and XCD35. “Given the rapid growth in India’s mobile market, we feel there is a tremendous opportunity to grow in the smartphone category,” says Mahesh Bhalla, GM (consumer and SMB) at Dell India. And there is more to come.
Nokia’s Shivakumar says the world’s largest mobile handset maker, which is globally struggling to compete with iPhones, BlackBerrys and Google Android-based phones, is looking to create a wider portfolio of smartphones in the price range $50-500.
Samsung too plans to introduce lower-priced models with the hope of cornering a 40% share in the smartphone market by the year-end — a rather ambitious target given that as of September it had only 12% s market share in smartphone.
“Brands are looking at the category through new and aggressive launches. More than price drop, there will be introduction of more affordable price points to grow the segment,” says Ranjit Yadav , country head (mobile & IT) of Samsung India.
LG, the country’s largest consumer durables player, will spend almost one-fourth of its entire marketing budget of Rs 400 crore for next year on smartphones, says Vishal Chopra, business head (mobile communication) at LG India.
“Smartphones will be our imagery drivers and will establish LG mobiles as a premium and aspirational brand,” says Chopra. LG will launch about 15 smartphones next year in Android and Windows platforms.
Kunal Bajaj, director and partner at telecom consulting firm Analysys Mason India says, “A large number of consumers — the $50-100 phones users — are still to replace or upgrade their phones wherein lies the future potential.”
Smartphones contribute maximum margins for mobile phone manufacturers and analysts feel protecting these margins would be the next challenge for handset makers, specially when the entry-to-mid level segment is flooded with more than 100 brands.
The average selling price of smartphones has dropped from Rs 19,000 in Q3 of 2009 to Rs 13,000 in the Q1 of 2010 to around Rs 10,000 now, according to Analysys Mason.
This may have put pressure on the margins of handset makers. But then, to succeed in India they need to get the price point right.