In handsets, it’s smartphones all the way [DNA : Daily News & Analysis (India)]

(DNA : Daily News & Analysis (India) Via Acquire Media NewsEdge) Think mobile phones, think smart.

The last two years have seen smartphone sales log a phenomenal growth. The next two could well see incremental sales of smartphones exceed those of feature phones, if the numbers are any indication.

Total handset sales breached the 50 million mark for the first time in the quarter ended March, according to CyberMedia Research.

Though smartphones accounted for a mere 5.3% of this pie, under 2.7 million units, they are seen setting a scorching pace.

As per market research firm IDC, smartphones logged a growth of 9% last fiscal. However, this figure is expected to touch 68% by 2015.

CyberMedia sees the Indian telecom services and mobile handsets market growing 16.7% in 2012, touching revenues of `288,832 crore – telecom services, contributing mobile and fixed line services, accounting for `205,454 crore and handsets, including feature phones and smart phones, accounting for `83,377 crore.

The handsets market will grow at over 30% during 2012, said CyberMedia.

Interestingly, multi-SIM handsets made up two-thirds of the sales in the March quarter, while 3G phone sales aggregated 10%.

Smartphones, however, accounted for a quarter of the revenues.

According to IDC, the share of smartphones in India is expected to touch 9.3% by 2016, up from 2.9% during 2012, making it the fastest growing smartphone market among the emerging nations.

So much so, handset sales are growing much faster than subscriber additions, say experts.

"The drop in smartphone rates every six months has fuelled the replacement handset market as well. Today, the shelf life of a phone has come down from three or more years to 18 months, and more migration is also taking place with the launch of new handsets. The replacement market today is thus even bigger than the first-time handset purchase market," said A Sethuraman, executive director, Huawei India.

Somil Gupta, chairman, Planet 41 Mobi-Venture, a mobile value added service provider, is convinced smartphones will overtake feature phone growth in the next 2-3 years.

"This is why several handset manufacturers today are shifting focus to smartphones. In fact, LG has completely stopped manufacturing feature phones, while Samsung is also focusing more on smartphones," he said.

To be sure, Sony has also said that it would phase out its feature phones by September this year and make only smartphones.

In China, smartphone sales have already overtaken feature phone sales in absolute terms, said Sethuraman, adding, "in India, this should not take more than a year or so". Smartphone penetration in China stands at 83%, he said.

Shashin Devsare, executive director of low-priced handset player, Karbonn Mobile, couldn't agree more. "As per the latest Cisco Visual Networking Index Forecast, in India, there will be 2 billion networked devices by 2016, up from 1 billion in 2011.

Karbonn has now also delved into the smartphone category with the brand extension 'Karbonn Smart'."

But just what is driving the smartphone rush

"First, there has been a marked reduction in smartphones prices. Today, one can purchase a smartphone for `3,000-4,000, which is only marginally higher than a basic handset. Secondly, free downloadable content in the form of apps, which are now readily available to the huge prepaid subscriber base, is also pushing smartphone growth," said Arun Vohra, independent telecom consultant and former head, Videocon customer service delivery.

Burgeoning demand for data services is also a factor.

"So many first-time internet users today are having their first experience of browsing on the mobile phone," said Sethuraman of Huawei.

Gupta of Planet 41 Mobi-Venture concurred. "While their overall penetration stands at 7-8%, smartphones are still growing at a much faster rate than feature phones. This has a lot to do with growing data demand, which is set to overtake voice in the coming years. The reason for increasing smartphones preference is also due to the data choices offered – cloud backup, push and pull email services, innovative apps, high-speed internet and social networking capabilities. About 95% of smartphones today are also 3G-enabled," he said.

The recent reduction in tariffs of 3G services has also played a role.

"With the recently announced reduction in 3G tariff of as much as 70% by major telecom companies, the market for both 3G-enabled devices and mobile broadband-driven content is likely to rise in the coming quarters," said Tarun Pathak, analyst, telecom practice, CyberMedia Research.

Total shipments of 3G-enabled mobile handsets in the country grew 34% on year in the March quarter.

Samsung, the smartphone leader, attributes the growing interest to a richer browsing experience. "With open source technology, it is now possible for handset manufacturers like us to offer a plethora of apps, which can be customised to individual needs. With technology ramp-ups, the fall in prices are passed on to the end consumer. This is why today half of our revenues in India come from smartphones," said Asim Warsi, vice-president, Samsung India.

Credit:Beryl Menezes

(c) 2012 @ 2012 DILIGENT MEDIA CORPORATION LTD. ALL RIGHTS RESERVED