Towards 2016 -- 7
From leading Indian mobile handset player Micromax, a look back at 2015 and a look at upcoming trends in the mobile communication business in 2016
December 31, 2015: The year 2015 was action packed for the Indian telecom market. From disruptive innovations in technology, design and price of mobile phones, to LTE networks being rolled out, the telecom industry in the country proved to be one of the most dynamic in the last one year with major action happening in the internet services and start up space too. All these development further add on to the fact that India is one of the most attractive and sought after market all set to overtake US, to be the second largest smartphone market in the world.
With heavy discounting deployed by the major online e commerce portals in the country, the year saw a fierce battle amongst them to grab market share. Leading e-commerce companies practically had to buy into their sales share with 1 in 3 smartphone in October’15 sold using the digital platform. With a lot of discounted offers, “exclusive-to-online” products accounted for about 17% of the total smartphone volumes, while the overall online including marketplace touched around 25% of the volumes. The online platforms gave a lot of Chinese brands an easy India launch pad without much investment in the distribution and service channel.
Another notable development was the roll out of the 4G network in the country proving to be an interesting space to watch out for and a game changer in India’s internet penetration. As has been the case so far, smartphones always lead the technology shift and with 4G network rollout, India will become one of the biggest mobile internet markets in the world leading to the launch of many services that consumers can benefit from. This has further provided an impetus to the adoption of 4G handsets as 40% of smartphones being shipped are already on 4G i.e. about 3.5 million units every month. Over 45%-50% of these 4G devices are being sold through the online sites and the expectation is that this trend will continue, as online caters to significant portion of the smartphone replacement buyers. All this will lead to having more than 9 crore 4G subscribers and 18 crore 4G smartphones by 2018.
The Prime Minister’s ‘Make in India’ initiative gathered steam this year with not only the domestic manufacturers but also global brands investing hugely in local manufacturing which will further lead to his vision to ensure a smartphone in the hands of every citizen by 2019. Close to 30% of the handsets being sold monthly are manufactured or assembled locally giving a big boost to the Indian handset market as companies are now able to quickly bring the latest technologies to the market in a short span of time.
Another significant trend that continues to be the fundamental driver for the growth of this segment is the feature phone to smartphone transition especially by the first time users with entry level smartphone being made more accessible and attractive with a fantastic price to features ratio. With 60% of the user base still on feature phones, the expectation is that close to 70-80 million feature phone consumers will switch to affordable smartphones and the industry will definitely see more action in the coming year making 2016 the year of smartphone.
Given the positive GDP growth projection of above 6.4% from IMF, 2016 looks set to be another year of strong but evolving opportunities for the Indian technology sector. The coming year also seems to be a year where the industry will look forward to progressive reforms and policies focusing on making ‘Make in India’ a success as well as including fair and progressive policies on IPRs and GST implementation etc. to help Indian companies lead the technology movement in India as well as compete in the global markets.
Some of the trends that will help further fuel the smartphone industry in India will be:
1. Massification of smartphones will continue in this country primarily catering to the first time feature to smartphone mover. While this transition will bring wonders of the connected world to these users, future growth will hinge on breaking barriers around vernacular usage, access costs and penetrating distribution and awareness to the next 100 Mn Indians.
2. In 2015, we have already seen the proliferation of 4G enabled devices. While these will be an on-going trend, the end user SIM adoption is yet to pick-up. With mass-scale network launches by key operators we should witness the adoption, albeit this is a long journey. Can India see the first 100 Million 4G users in 2-3 years? With further LTE centric spectrum to be auctioned in 2016, this could very well be a reality where 4G will play a crucial role in building Digital India. However, we believe 3G and 2G users will continue to co-exist over the next few years.
3. Within the handset industry, so far Samsung and Micromax have been the flag-bearers of “Make in India” by ramping up domestic manufacturing. In 2016, clearly a lot of additional capacity will come up as Chinese and Indian brands/ODMs drive investments into this space with continued policy incentives. This will be a key driver for new business models to emerge to ensure unit level profitability as operations ramp up. We may also witness the beginning of some key component level manufacturing as global component suppliers evaluate their business viability and setup establishments here.
4. In terms of sales channels, 2015 saw e-commerce establishing itself as a significant portion of the Indian handset market. In 2016, e-commerce might flatten out, as these platforms will cut back their cash burns. However, the reach will expand to newer towns and consumer segments and will be a key driver of technology adoption.
5. Mobile led services will become mainstay and mobile internet ecosystem will grow beyond the 150-200 Mn smartphone users driven by a strong collaboration between the device, access and service eco-system. The entire mobile ecosystem will come with the launch of a number of services across sectors like entertainment, travel, healthcare and banking. The coming year will see the entire mobile industry joining hands with an aim to foster a culture of innovation, creating solutions that can take care of indigenous needs and building an empowered ecosystem for permeating technology into the nooks and crannies of the country. The key to this growth will be simplification through relevant services and availability of these in various Indian languages.
6. From the hardware standpoint, 2016 will be the year of large screens and videos. With the wide availability data network, content, personalisation and hardware in place, a smartphone will become a more preferred source for video consumption.
7. Implementation of GST could again be a turning point for the smart device industry and might prove to be a barrier for an easy-India-entry strategy of a lot of the chinese brands. GST will ensure taxation benefits for focus on distribution and for being present across the breadth of the country.
As we close the year 2015 on a high, the year 2016 will be the year of consolidating this mobile led growth with Micromax leading the charter with Micromax 2.0.