Fea­ture Phones May Keep Lead Over Smart­phones

Low-cost 4G fea­ture phones may fur­ther stall shift to smart­phones: re­port

The Economic Times - - Companies: Pursuit Of Profit - Dan­ish.Khan@

timesin­ter­net.in New Delhi: Fea­ture phones may con­tinue to rule In­dia’s hand­set mar­ket in 2017, repli­cat­ing the sce­nario last year, when mi­gra­tion from ba­sic de­vices to smart­phones slowed due to af­ford­abil­ity, dura­bil­ity and longer bat­tery life. Low­cost 4G fea­ture phones could fur­ther stall the move to smart­phones, ex­perts said.

“Fea­ture phones dom­i­nated to­tal hand­set ship­ments in In­dia in 2016 and we ex­pect this trend to con­tinue in 2017,” JP Morgan said in a note to clients. “The con­tin­ued rel­e­vance of fea­ture phones makes In­dia stand out as the big­gest fea­ture phone mar­ket glob­ally (com­pris­ing about 30% of to­tal vol­ume).”

It said im­proved fea­ture phone spec­i­fi­ca­tions and the fact that they are typ­i­cally as much as half the price of good qual­ity, low-end smart­phones are among the key bar­ri­ers pre­vent­ing up­grades to smart­phones.

“With sup­port for mo­bile bank­ing and 4G ca­pa­bil­i­ties (likely in 2017), fea­ture phones will re­main pop­u­lar in the In­dian mar­ket even in 2017,” JP Morgan said. JP Morgan ex­pects smart­phone ship­ments in the fourth quar­ter to fall 20-25% se­quen­tially, tak­ing the to­tal for the year to 108 mil­lion units, hurt mainly by the in­val­i­da­tion of high-denom­i­na­tion cur­rency notes in Novem­ber.

It es­ti­mates smart­phone sales to grow about15% to125 mil­lion in 2017, led by Chi­nese hand­set mak­ers, from an ex­pected 5% growth in 2016, when the mar­ket was hit by de­mon­eti­sa­tion. In con­trast, smart­phones sales have im­proved steadily in China and now ac­count for about 90% of the mar­ket.

“We be­lieve that to­tal hand­set sell-in will re­main de­pressed in Jan­uary and Fe­bru­ary as chan- nel in­ven­to­ries are di­gested, with nor­mal sell-in likely to re­sume from March,” JP Morgan said, adding that the first quar­ter of the next fi­nan­cial year start­ing April 1 may still see some im­pact of de­mon­eti­sa­tion. “We should start see­ing nor­malcy as we course through 1QCY17 to 2QCY17.” The bro­ker­age said re­place­ment de­mand con­sumer up­grades will drive the bulk of to­tal 2017 smart­phone ship­ments. Be­sides, gov­ern­ment in­cen­tives, fasterthan-ex­pected roll­out of 4G net­works and avail­abil­ity of ul­tra-low-end 4G de­vices will sup­port smart­phone adop­tion in In­dia, where they have a 25% mar­ket share. A big hur­dle to smart­phone growth could come in the form of the low-cost 4G fea­ture phone, ex­perts said. The 4G ba­sic phone cat­e­gory will de­lay the mi­gra­tion due to the sub­sidy el­e­ment and could be dis­rup­tive for about a year, said Shub­ha­jit Sen, chief mar­ket­ing of­fi­cer of do­mes­tic hand­set maker Mi­cro­max In­for­mat­ics. Mukesh Am­bani-led Re­liance Jio In­fo­comm is said to be work­ing with orig­i­nal equip­ment mak­ers to launch 4G VoLTE fea­ture phones un­der the Lyf brand and sub­si­dis­ing part of the sell­ing price to make them avail­able for about Rs 1,000 (about $15), ET re­ported ear­lier. Jio hasn’t of­fi­cially dis­closed any plans around the 4G fea­ture phone. Lava has al­ready launched In­dia’s first 4G VoLTE fea­ture phone at ₹ 3,333.

Backed by ag­gres­sive mar­ket­ing spends and in­vest­ments in brand build­ing, Chi­nese ven­dors have been quick to cap­i­talise on the emer­gence of on­line chan­nels and mi­gra­tion from 3G to 4G de­vices in In­dia.

“With com­pe­ti­tion from China show­ing no signs of abat­ing, we ex­pect Chi­nese play­ers to con­tinue to dom­i­nate the smart­phone mar­ket even in 2017. The way ahead for In­dian smart­phone brands looks chal­leng­ing since Chi­nese brands have all al­ready lo­calised their man­u­fac­tur­ing in In­dia and are well ahead on R&D and prod­uct brand­ing,” JP Morgan said.

The 4G ba­sic phone cat­e­gory will de­lay the mi­gra­tion due to the sub­sidy el­e­ment

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