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India's Smartphone Market Contracts in Q4 2014

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India's smartphone market experienced a shipment contraction in the fourth quarter of 2014 for the first time ever on a quarter over quarter basis, according to IDC analysis. This was largely due to a high channel inventory at the beginning of the quarter among general trade, which in turn was caused by the surge witnessed in online sales during festive season.

Q4 2014 was seen as a correction phase wherein the smartphone market declined by -4% quarter over quarter while the feature phone market plummeted by approximately -14% over Q3 2014. The overall mobile phone market stood at 64.3 million units in Q4 2014, which reflects a sequential drop of -11% over Q3 2014 and an year-over-year decline of -5%.

The feature phone to smartphone transition trend is clearly visible. Smartphones formed a healthy 35% of the overall mobile business in Q4 2014, which is up by 13% from the same quarter a year ago.

"Smartphone vendors have been quick in gauging consumer demand for 4G handsets. In percentage terms, 4G handsets are still in single digits, but vendors who are not yet ready with a 4G portfolio are likely to miss the next wave of smartphone growth," said Karan Thakkar, Senior Market Analyst, IDC India.

Shipment contributions from vendors like Asus, Microsoft, and HTC have witnessed traction in the recent past. Asus's growth is somewhat linked to the handset vendor itself. The Zenphone series is always in demand and often the product is out of stock at the retail counter. On the other hand, Microsoft and HTC have more aggressively priced products to offer.

"In the current market scenario there is a drive in demand for products pitched with high specifications at low price points. This trend is likely to continue over the next four to 6 quarters, after which consumers are expected to turn back to the handset vendors who charge premium for quality," added Thakkar.

Samsung: Samsung maintained its leadership position in Q4 2014. Apple presented stiff competition for Samsung during this time, while "online exclusive" brands are hurting the brand in the value for money category.

Micromax: The brand witnessed an inventory correction in Q4 2014 owing to high inventories pumped into the channels during the previous quarter.

Intex: Intex did not feature in the top five smartphone vendor list until Q3 2014, but the swift pace at which the brand has seized the number 3 spot is commendable. The retail presence of the brand has seen more than a twofold increase and its focused product launches and media advertisements have worked well for the brand.

Lava: Lava has slipped to the number 4 position. However, the brand remains consistent and stable with a good amount of visibility among its distributors.

Xiaomi: Xiaomi's "online only" strategy has paid off well. The fourth quarter was the first complete quarter for the brand. Even with minor hiccups like a temporary ban on a particular handset model, the brand made it to top 5 smartphone vendor list.

The overall mobile phone market declined by -11% quarter on quarter in Q4 2014. The steep fall can be attributed largely to the feature phone category. While Karbonn did not make it to the top five vendor list in smartphone category, it continues to remain strong in the feature phone segment.

A quick look at overall vendor shares shows the strong presence vendors have in the feature phone segment contribute to their position in the top five list at an overall level.

IDC anticipates a sluggish Q1 2015, although a few global vendors which were in the inventory correction phase until now are likely to exhibit big shipment numbers starting in Q1.

"Operators are gearing up for the 4G network rollout. For vendors and ecosystem partners, greater emphasis on 4G enabled handsets at competitive price points will be the order of the day. End-users' desire to upgrade and keep abreast with the latest technology will continue to drive strong growth for the smartphone market throughout the course of 2015," said Kiran Kumar, Research Manager, Client Devices, IDC India.

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Tags: smartphone  xiaomi  htc  asus  micromax  India