NEW DELHI: India has pipped the United States to become the world's second-largest smartphone market, after China, with over 40 million units shipped with 23% yearly growth in the third quarter of 2017, Singapore-based market research firm Canalys said.The findings were similar to those of Hong Kong-based Counterpoint Research, which said India shipped a record 84 million units - smartphones and feature phones - during the quarter ended September, and 75% of the units were locally made. At present, more than 100 factories produce phones locally. Counterpoint, however, said India overtaking the US in shipments is a temporary phenomenon.
The market growth was fueled by Chinese handset maker Xiaomi, which increased its shipments by over 290% to 9.2 million units in the quarter, further narrowing the market share gap with Korean major Samsung, which shipped 9.4 million units in the quarter, almost 30% more than in third quarter last year.
Canalys analysts now reckon that Xiaomi may soon overtake Samsung in India.
According to analysts, while shipments were strong in the lead up to the festive season, actual sales were tepid, leading to inventory pile up. They said Xiaomi appears to have done better than most, even in actual sales. "Fourth quarter will be crucial for offline players as they need to streamline their inventory levels, which they have accumulated ahead of Diwali.
We expect discounts and offers to run even post Diwali,, said Tarun Pathak, senior analyst at Counterpoint Research.
“Xiaomi’s growth is a clear example of how a successful online brand can effectively enter the offline market while maintaining low overheads. But Xiaomi focuses on the low end. It struggles in the mid-range (devices priced between Rs 15,000 and Rs 20,000 [$230 and $310]), where Samsung, Oppo and Vivo are particularly strong. Nevertheless, we predict Xiaomi’s continued go-to-market innovations will allow it to overtake Samsung within a couple of quarters," Canalys Analyst Rushabh Doshi said, in a statement.
Owing to high volumes of its affordable range of phones, Xiaomi has cut through competition since its entry in the Indian market in July 2014. While the company was majorly selling through online platforms in its initial years, its offline entry with partners and through its own Mi Home stores, has propelled its sales manifold. Xiaomi India head Manu Kumar Jain, in a Facebook post, revealed that the handset maker sold more than 4 million smartphones across Amazon, Flipkart, Mi.com, and through offline channel partners.
Both Samsung and Xiaomi accounted for almost half of the total market as the top five vendors continued to post strong growth in the third quarter. Despite posting excellent results, the market continues to concentrate, with the top five vendors -- Samsung, Xiaomi, Vivo, Oppo and Lenovo -- now accounting for 75% of total shipments in India.
On the overall market performance, Canalys Research Analyst Ishan Dutt said, "This growth comes as a relief to the smartphone industry. Doubts about India’s market potential are clearly dispelled by this result. “There are close to 100 mobile device brands sold in India, with more vendors arriving every quarter. In addition, India has one of the most complex channel landscapes, but with low barriers to entry. Growth will continue. Low smartphone penetration and the explosion of LTE are the main drivers," Dutt added.
After a rocky start to Goods and Services Tax (GST), the market has shown strong signs of stability in the quarter, with most of the channel adapting to the new rules on time. “The Indian economy is proving very strong in the second half of 2017, now that the twin shocks of GST and demonetization are behind it. Reduced indirect taxes have added new equity to the market, with distributors and retailers able to serve areas beyond their home regions as inter-state operations become easier. As the infrastructure matures, consolidation in distribution is inevitable," Doshi added.
Apple began local production in India earlier this year, and its iPhone shipments more than doubled to 900,000 units in the quarter compared with last year's quarter. Canalys said that Apple's groqth was impressive growth, especially when the market is skewed toward low-end smartphones.
