Bernstein Research said in a report that India presents the world's largest smartphone growth potential for the next five years.
Analyst Mark Li noted in the report named 'India: The Next China for Smartphones?' that the South Asian nation is expected to more than double its smartphone shipments in the next 5 years, overtaking the U.S. to become the world's second biggest market, although it is already the world's largest smartphone maker behind China.
"This forecast is not aggressive, because even by
then, the smartphone penetration will still be just around 35 percent,
below the level in China and Brazil today," Li said.
In India, smartphone producers will have to use a strategy different from the one deployed in China.
Low average
selling prices (ASPs), slow technology migration and a high reliance on
retail channels are the factors characterizing the smartphone market in India.
The bulk of the smartphone growth comes from the
below-$100 segment.
In 2014, over 40 percent of handsets sold in the country were priced under $100, and that proportion is expected to double in the next five years.
"This is much lower than the ASP in China or Indonesia, let alone developed countries," Li said. "Unlike in China or developed markets, operators provide little handset subsidy and account for only 4.5 percent of India's market," he said.
As for technology, India is still four years behind China's adoption of 3G and also well below the level of other large, emerging Asian markets.
Since almost 70 percent of the Indian population lives in rural areas where networks have a smaller presence, smartphone distribution happens through retail channels rather than by network operators.
Another factor hampering smartphone distribution is low internet penetration and weak logistics infrastructure which restrain the work of such e-commerce resources like Amazon India and Flipkart.
Given the below listed features, low-cost manufacturers will perfectly fit into the Indian market, according to the report.
Currently, Samsung occupies the top smartphone vendor in India with a 27.8
percent market share, which has been decreasing in the past
few years due to rising competition from domestic vendors. India's
Micromax, Intex and Lava are the second, third and fourth biggest
players, with a 15.3 percent, 9.4 percent and 5.4 percent market share,
respectively.
The report also noted this fact saying that it will be harder and harder for foreign brands to compete with Chinese or local companies.
Lenovo, after the acquisition of Motorola, has quickly gained market share in India through its partnership with Flipkart.
Xiaomi is one mainland manufacturer that has already succeeded in the market with its low-price devices. It entered India last July and already has a 5 percent share of the market. Earlier this year, the company announced plans to establish a manufacturing base in the country to meet strong demand.
