India Diwali KK

HSBC: India Surpasses China In Premium Smartphone Sales

July 11, 2015 - Written By Kishalaya Kundu

According to a report from British multinational banking and financial services company HSBC, India has moved past its northern neighbor China to become the fastest growing market for high-end smartphones in the world. The report sites increasing adoption of 3G services and lower installed base as the two primary reasons for the phenomenon. The HSBC Global Research Report reads, “China was the volume growth engine since 2013… However, given China’s smartphone penetration having reached 95 percent in 2014, further growth will be derived from other emerging countries with relatively low smartphone penetration… We forecast that smartphone shipments will grow at a 2014-19 CAGR of 26 percent in India, followed by 19 percent in Middle East (West Asia), 8 percent in Latin America and 5 percent in China”.

Indian media outlets however are pointing out some factual inaccuracies and inherent flaws in the report. While the HSBC report claims India was globally the second largest market for smartphones last year with 275 million units sold, the country’s most reputable news agency PTI (Press Trust of India) points out that only 81 million units were actually sold in the country in the calendar year 2014 making it the third – not the second – biggest market, after China and the USA. Another anomaly in the reports seems to be the part that alludes to the growth of 3G services in India. While that may be a technical reality, commentators believe the real growth in high-end gadgets have come from higher disposable incomes and the increased adoption of LTE in most urban markets even at the entry-level, where Lenovo reportedly sold over a million 4G devices within just months of introducing two well-priced high-specced entry-level models. The technology is expected to see further adoption next year with the launch of Reliance Jio in December this year.

The HSBC report meanwhile, goes on to state that even with high growth over the past couple years, smartphone penetration still stood at only 30 percent at the end of last year, which is significantly below global levels of 72 percent. The Chinese market meanwhile, is reaching a saturation point with around 95 percent of all mobile phone users owning smartphones. The report by HSBC attributes the low smartphone penetration to the lack of carrier subsidies in India, where people have to pay over $1,000 at once to get their hands on a Galaxy Note 4 or an iPhone 6 Plus. The report also reiterates something which is common knowledge in the country. The fact that offline retail is still the king even with the exponential growth in online retail in recent times. Less than 10 percent of all smartphone sales in India happen online according to the report, as opposed to 20 percent in China.

The HSBC report goes on to say, “We note there are currently 70 million 3G users and total Internet users are estimated at 243 million (including 2G data users). Increasing Internet adoption and ability of e-commerce portals to get into exclusive deals with handset makers suggest that online handsets sales may double to 20 percent over the next 18 months. … While we believe demand for 3G smartphones will continue to dominate for the next 12-18 months, post that, will it be still 3G-led demand or 4G-led demand will depend on how successful 4G entrants are with their offerings”.