Lower festive demand brought down total numbers, but manufacturers still made money as users shifted to higher priced handsets
A noticeable fall in festive season demand and the continued inflationary pressures on components has caused market analysts to lower their annual outlook for smartphone shipments, making it the first time in decades. That is, if one were to discount the plunge witnessed during the first wave of Covid-19.
The quantum of decline varies across market research organizations with IDC India putting the number between 8% to 9% and Counterpoint Research pitching for a much smaller 3% drop. However, there is near consensus that the macroeconomic headwinds, continuing inflationary pressures and fear of recession curtailed demand, especially at the entry-level of handsets.
But, manufacturers are sitting pretty
Of course, smartphone manufacturers aren’t unduly concerned, given that most of them are reporting higher revenues. Largely fuelled by the shift towards premium and high value handsets during the festive season. The average sales price got pushed to record levels during the August to October timeframe.
While IDC India revised its estimates down from 160 million to 150 million due to the lowest third quarter numbers since 2019, they also pointed out that the trend of entry-level handsets not getting as many innovations as in the past resulted in lower growth in this high volume category of smartphones.
However, Counterpoint Research believes that the percentage of decline in the annual shipments would be only around 3%. They expect shipments to be around 163 million compared to the 175 million units estimated earlier in the year. What’s interesting is that their downscaled number is still higher than those presented by IDC India.
There’s more to it than mere inflation
The market analysis company lists out a couple of reasons for this slump, over and above those related to macroeconomic factors. They concur with IDC that entry-level devices aren’t attracting as much attention as the upgrade cycles have gone up due to the innovations carried out by the manufacturers three to four years ago.
Consumers are holding on to their handsets for longer – from up to two years to more than 2.5 years now, which could automatically translate into lower volume sales year on year. However, the impact on revenues would be low due to higher average selling prices and consumers actually preferring more expensive devices now.
Of course, this once again could result in users holding on to their devices longer, as we have seen in recent years with iPhone customers missing not one but even two new launches. Counterpoint estimates sales to grow by 4% in 2022 with Samsung topping the charts followed by Apple and Xiaomi.