By Akriti Rana & Nimish Dubey
New Delhi: There are two ways of looking at reduced shipments. You could attribute them to a slowing down of economic activity or attribute them to an excess of demand over supply. A number of experts seem to have taken the latter route when Counterpoint released information about the performance of the Indian smartphone market recently. Even the research agency seemed to be subscribing to this line of thought. “India Smartphone Market Records Highest Ever Shipments, Revenue in 2021” was the headline of its own take on its findings.
The reason for this rosy picture of the Indian smartphone market is obvious — the statistics show that smartphone shipments in 2021 rose to 169 million units, the highest ever in a single year, reflecting a 11 per cent year-on-year growth as compared to 2020. The fact that this record came in spite of a number of setbacks including a devastating second Covid-19 wave and the accompanying lockdowns, and supply issues caused by a global component shortage, which in turn led to an increase in smartphone prices.
Two Successive Quarters Of Negative Growth
All of which sounds magnificent. As long as you do not really pay too much attention to the last two quarters of this record breaking performance — Q3 and Q4 of 2021, as they are referred to. This is the period from July 1 to December 31. Traditionally, brands tend to do very well in this period in India, with massive discounts on online sales festivals in August and the festive season that follows which witnesses extremely high expenditure. In short, it is the time when consumers tend to spend the most.
India’s smartphone sales dipped by 2 per cent in Q3 2021, and 8 per cent in Q4 2021, as per Counterpoint Research. In both cases, the research outfit said that this was due to demand outstripping supply, and supply itself being limited due to component shortages.
Riding On Record-Breaking Q1 And Q2 Performances In 2021
The Indian market’s record-breaking performance in 2021 actually stems not from great end of the year shipments, but from unusually good first and second quarters. As per Counterpoint Research, the market grew by 23 per cent in Q1 2021, to reach 38 million units — the highest figures ever recorded in the first quarter of a year. The second quarter seemed more impressive in terms of year on year growth, growing by 82 per cent, but that was largely because a lot of the economy had been shut down for a significant period of time in Q2 2020.
In reality, there was a slight dip when you compared Q2 2021 to Q1 2021, slipping from 38 million to 33 million, but it was still better than what many had expected, especially after the country had been ravaged by the second wave of Corona.
Dipping In Spite Of The Festive Season
Just when people were expecting a great Q3, shipments dipped. Q3 2021 saw shipments of 52 million units, which was 2 per cent down from Q3 2020. This was especially surprising because Q3 2020 had seen the Indian smartphone business hit its biggest quarterly high ever — shipping 53 million units, the highest ever in a single quarter in India. As this surge had come partly due to a pent-up demand because of the pandemic, there was a feeling that the same would happen in Q3 2021. Unfortunately, it did not, and the market slid back a little.
Many however, predicted that Q4 2021 would be much better as brands would be stocking up for the festive season, notwithstanding component supply issues which were becoming apparent — "India Smartphone Shipments Cross 52 Million Units in Q3 2021 as Brands Prepare for Festive Season" was how Counterpoint reported it. The agency's assumption was a rational one, given that smartphone brands generally tend to do very well in the final two quarters of the year.
However, in spite of the very positive headlines for 2021 as a whole, the final quarter of the year did not actually turn out to be great for smartphone brands. The sector recorded an 8 per cent decline, despite a number of high profile launches and discounts. Even with Diwali, one of India's most popular festivals that often triggers heavy expenditure, falling on November 4, the figures could not beat last year's and were a step down from the previous quarter as well. Counterpoint puts the blame on supply issues, and that is very likely to be true. But that does not change the fact that even as many people celebrate a record year for the Indian smartphone market, all is not exactly well.
The Challenge In 2022
January 2022 has given us hints of how tough the going could be in the coming months. OnePlus, one of the most popular brands in the premium segment in India, released its OnePlus 9RT device in the country almost three months after releasing it in China. And Xiaomi surprisingly released phones under the more expensive Xiaomi brand in the month and not a single device from its bestselling Redmi portfolio. Samsung too released just one device and that too a premium one — the Galaxy S21 FE. The component shortage has also hit prices and Indian consumers are seeing smartphone prices increase for the first time in a while.
The reason for this, we are told, are supplies of components, especially processors. But there is also genuine concern that the persistence of the pandemic has created negativity and resulted in lower expenditures, which resulted in even the share markets dipping towards the end of January (they do seem to have rebounded a little following the Union Budget). Some sources are even saying that the year might see brands focus more on slightly higher priced devices, in an attempt to even out earnings lost through decreased sales. Of course, this is just speculation.
For all you know, the first quarter of the year could well turn out to be another record breaker like its predecessor. But there is still a long way to go. 2021 might have been a record year, but we should not ignore that it ended on a slightly rough note. India's smartphone market may not be in a slowdown mode, but it definitely could do with a growth boost. Where this will come from is anyone's guess.